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CORPORATE MEMORY 2019 2 3 4 5 6 AUSTRALIS SEAFOODS INDEX 7 Corporate Memory Corporate Memory 2019 2019
CONTENT
9 PRESENTATION 10 Letter from the President 14 Featured milestones 2019
17 THE COMPANY 18 Identification of the company 20 Ownership and Control 22 Structure 24 Mission, Vision and Values 26 Historical review
29 CORPORATE GOVERNANCE 30 Board 32 Administration 33 Remunerations 35 Diversity within the company 36 Directors' Committee Annual Management Report 38 Information on relevant or essential facts
45 THE SALMON INDUSTRY 47 The product 48 The offer 50 The demand 52 Competition 53 Prices
57 THE BUSINESS 58 Business description 63 Investment and financing policy 65 Risk factors 67 Facilities 68 Insurance 68 Licenses and concessions 71 Legal framework 72 Dividend policy 72 Distributable profit 74 Risk classifications 75 Stock titles 76 Information on subsidiaries and associates 85 Liability statement
87 CONSOLIDATED FINANCIAL STATEMENTS 8 AUSTRALIS SEAFOODS PRESENTATION 9
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PRESENTATION 10 AUSTRALIS SEAFOODS PRESENTATION 11
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LETTER FROM THE PRESIDENT
For Australis, this was a year of development, investment and evolution, For Australis, this was a year of development, investment and evolution, which in turn brought about the change of main controller. Legend Holdings Corporations, a Chinese business conglomerate, which in turn brought about the change of main controller. Legend Holdings successfully concluded the Public Offering of Shares (OPA), to acquire 100% of the company, Corporations, a Chinese business conglomerate, successfully concluded the which culminated in an acceptance of 99.89% of the property, the rest remaining with minority shareholders. Public Offering of Shares (OPA), to acquire 100% of the company, which culminated in an acceptance of 99.89% of the property, the rest remaining From a commercial point of view, during the year in question, the industry presented consistent prices above the average of the last 10 years, despite the fact that the world supply of salmon grew by with minority shareholders. 6.5% compared to 2018. In relation to consumer demand and valuation, we can highlight that salmon continues to position itself as a healthy, tasty and versatile source of protein to consume.
On the other hand, the consolidated figures show total sales of US $ 407 million and a profit after I am pleased to write to you to present the Corporate Memory and Financial Statements of Australis taxes of US $ 66 million, numbers that confirm, that for Australis, 2019 continued to be a year of Seafoods SA corresponding to the 2019 financial year. This period was marked by a series of great development. milestones that have been fundamental in terms of consolidation and expansion of our company, from a historical harvest of 71,976 tons WFE, the positioning of our operation in the Magallanes region and definitions regarding sustainability.
This year's production had an increase of more than 20% compared to the previous year, maintaining good productive and sanitary results in our farms. The company continued its consolidation and development in the Magallanes region, which in December 2019, represented almost 50% of total production. We are very satisfied with the achievements made to date and focused on continuing to consolidate the production strategy with a focus on sustainability and efficiency.
In turn, this year the construction works of our Dumestre Processing Plant began, located in the city of Puerto Natales, Magallanes region. Construction includes state-of-the-art infrastructure and production equipment, this is an ambitious project for our company, which is in line with the positioning and growth strategy in the region. Added to this is the purchase of the Pesquera Torres del Paine Limitada, in the city of Punta Arenas which allows us to process 40 thousand tons of raw material per year.
This 2019 for us was also marked by the development of the guidelines of our first 2020-2030 sustainability strategy. This in turn included the first measurement of our carbon footprint. A job that Jie Tang is in direct line with our vision as a company, but also with our operational strategy. More details can CHAIRMAN be found in our Sustainability Report. AUSTRALIS SEAFOODS S.A. 12 AUSTRALIS SEAFOODS PRESENTATION 13
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We are a company that works to deliver to the world the best salmon produced in a sustainable way and of the highest quality 14 AUSTRALIS SEAFOODS PRESENTATION 15
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FEATURED MILESTONES 2019 ACQUISITION OF PLANTA CONTROLLER CHANGE PROCESADORA TORRES DEL AUSTRALIS SEAFOODS S.A. PAINE LIMITADA Legend Holdings Corporation, a On July 10, 2019 Australis Seafoods business conglomerate of the People's S.A. formalizes the indirect control of Republic of China, through its Pesquera Torres del Paine Limitada and subsidiary in Chile, Food Investment with it the operation of its process plant SpA, successfully terminates the Public located in the city of Punta Arenas. Offering of Shares “OPA”, launched This, after fulfilling all the conditions on June 26, 2019 to acquire 100 % proposed in the Purchase and Sales of the entire company. As a result, contract signed on February 28, 2019. acceptance of the offer was received for 6,814,640,680 shares, equivalent The purchase of the plant is in line with to 99.89% of the property. Leaving the company's production strategy of the remaining percentage in control of making production processes in the small shareholders. Magallanes region more efficient and effective.
LARGEST HISTORICAL HARVEST DUMESTRE PROCESSING PLANT CONSTRUCTION
In 2019 Australis Seafoods S.A. During 2019, construction work began reached its highest historical production on the new Dumestre Processing Plant, of salmonids by harvesting 71,976 located in the city of Puerto Natales, tons WFE, where 49.5% of what was Magallanes region. With a strong harvested came from the XII region. investment in infrastructure and state- of-the-art production equipment, the first phase is expected to be operational by the end of 2020. 16 AUSTRALIS SEAFOODS THE COMPANY 17
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THE COMPANY 18 AUSTRALIS SEAFOODS THE COMPANY 19
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IDENTIFICACIÓN DE LA SOCIEDAD
MAIN BRANDS USED IN THE MARKETING OF GOODS AND BASIC IDENTIFICATION CONSTITUTIVE DOCUMENTS SOCIAL OBJECT SERVICES CONTACT
NAME OR LEGAL NAME Australis Seafoods S.A. (the Purchase, sale, breeding, farming, The main brands used by the Company Australis Seafoods S.A. “Company”) was incorporated by import, export, commercialization and its subsidiaries for the purposes of PHONE means of a public deed dated October and distribution of all kinds of marketing its goods or services are the +56 65 256 6100 FANTASY NAME 31, 2007, granted at the notary hydrobiological resources and especially following: Does not have one of Santiago by Mr. Iván Torrealba of salmon species. Also all businesses WEB PAGE Acevedo, whose extract was registered that are directly or indirectly related to www.australis-seafoods.com REGISTERED OFFICE in the Commercial Registry of the the exercise of fishing and aquaculture Decher 161, Puerto Varas Real Estate Conservator of Santiago activities. EMAIL to pages 48,775, number 34,583, [email protected] UNIQUE TAX NUMBER (RUT) from the year 2007, and published in 76,003,557-2 the Official Journal on November 21, INVESTOR RELATIONS 2007. [email protected] TYPE OF ENTITY CONCERNED Open stock company.
REGISTRATION IN THE SECURITIES REGISTRY N ° 1074 dated May 19, 2011 20 AUSTRALIS SEAFOODS THE COMPANY 21
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OWNERSHIP AND CONTROL TOTAL NUMBER OF SHAREHOLDERS
At the end of the annual period, the COMPANY CONTROL total number of shareholders of the SITUATION Company is 31.
Pursuant to the provisions of Title XV IDENTIFICATION OF 12 LARGEST SHAREHOLDERS: of Law No. 18,045 on the Securities As of December 31, 2019, the 12 largest shareholders of the Company are: Market, as of December 31, 2019, IMPORTANT CHANGES IN PROPERTY the Company is controlled by Food Investment SpA, which holds 99.89% NAME OR LEGAL NAME STOCK PERCENTAGE On June 26, 2019, the company of its capital. Food Investment SpA Food Investment SpA published is in turn 100% controlled by Fresh FOOD INVESTMENT SPA 6.818.336.258 99,892% a notice of commencement of a Investment SpA. There are no natural public offer for the acquisition of persons behind the company Fresh shares for up to 100% of the shares Investment SpA that can be classified BCI Corredora de Bolsa S.A. 2.002.915 0,029% issued by Australis Seafoods S.A., as controllers under the terms of Title in accordance with the provisions XV of Law No. 18,045. There are no of article 201 of the Securities joint action agreements. SANTANDER CORREDORES DE BOLSA 1.148.669 0,017% LIMITADA Market Law (the “OPA”), which was extended between June 27 and July BANCHILE Corredores de Bolsa S.A. 987.579 0,014% 26, 2019, both dates inclusive.
During the term of the OPA, MONEDA CORREDORES DE BOLSA LIMITADA 595.238 0,009% Food Investment SpA received acceptances for 6,814,640,680 (six CONSORCIO Corredores de Bolsa S.A. 479.938 0,007% thousand eight hundred fourteen million six hundred forty thousand six hundred and eighty) shares, BANCOESTADO Corredores de Bolsa S.A. 461.156 0,007% equivalent to 99.838% (ninety-nine point eight hundred thirty-eight BICE INVERSIONES Corredores de Bolsa S.A. 317.835 0,005% percent) of the ordinary shares, of a single series and without nominal value, fully subscribed and paid, EUROAMERICA Corredores de Bolsa S.A. 253.998 0,004% which were acquired by Food Investment SpA. VALORES SECURITY Corredores de Bolsa S.A. 200.394 0,003%
BTG PACTUAL CHILE Corredores de Bolsa S.A. 192.431 0,003%
ITAU CORREDORES DE BOLSA LIMITADA 177.987 0,003% 22 AUSTRALIS SEAFOODS THE COMPANY 23
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CORPORATE STRUCTURE
This structure allows for the proper vertical integration of businesses, separating each stage of the production process within the group: smoltification, growout at sea and subsequent processing. With the above, value is added in each of the stages of the business, allowing flexibility and responsiveness to the different business units separately in the development of their role in the company's production plan.
20% AUSTRALIS NEW WORLD CURRENT 1 SEAFOODS S.A. LIMITED 99,9% 99,95% AUSTRALIS NAVARINO S.A. 99,0553% 50,33% 100% PROCESADORA DE ALIMENTOS ASF SPA 100% 0,01% CONGELADOS Y AUSTRALIS PISCICULTURA PROCESADORA DE CONSERVAS AUSTRALIS MAR S.A. AGUA DULCE S.A. RÍO MAULLÍN SPA ALIMENTOS AUSTRALIS SPA FITZ ROY S.A. 100%
49,67% 0,05% 1% 99% TRAPANANDA SEAFARMS LLC 0,9447% 100% 100%
AUSTRALIS RETAIL LTDA. SALMONES ISLAS DEL SUR LIMITADA COMERCIALIZADORA AUSTRALIS SPA 99% SALMONES ALPEN LIMITADA 99,99% 0,01% 1% 0,01% 99,99%
PROCESADORA NATALES PROCESADORA ACUÍCOLA CORDILLERA LIMITADA DUMESTRE LIMITADA LIMITADA
PESQUERA TORRES DEL 1% PAINE LIMITADA 99%
1 In November 2019, Australis left the New World Currents consortium. 24 AUSTRALIS SEAFOODS THE COMPANY 25
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OUR MISSION
We are passionate about generating a positive impact in people's lives, through the production and delivery of healthy food, challenging our way of doing things, through the sustainable development of communities and our environment VALUES
OUR VISION RESPECT AND HUMILITY Willingness to listen, valuing all the roles in our relationships. Knowing how Being industry leaders in a sustainable way through innovation and constant to listen, accept criticism, seek agreements, share knowledge, accept our challenge mistakes, be genuine and maintain our identity in success and adversity.
FELLOWSHIP Favoring the collective more than the individual, being available, giving advice, giving constructive feedback while maintaining a welcoming and close environment.
COMMITMENT Being responsible and giving the best of ourselves.
INTEGRITY Being consistent and coherent with what we seek. 26 AUSTRALIS SEAFOODS THE COMPANY 27
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HISTORICAL REVIEW
El 2019 Australis Seafoods cambia de controlador principal, al pasar a pertenecer al holding empresarial chino, Lenovo Holdings Group, el cual mediante una “OPA” ofertada en la bolsa de comercio de Santiago adquiere el 99,86% de las acciones de la compañía.
Australis took its first steps in 2003 from the development of genetic a long-term agreement with Aquagen fish mortality and more efficient cost located in Puerto Natales, Magallanes when its controller, businessman Isidoro material to the breeding of smolts in Chile S.A. (“Aquagen”), a leading control has been achieved throughout region. In line with the above and Quiroga Moreno, acquired Australis fresh water. company in the genetic development the entire production and commercial positioning development in the region, S.A., a company that produces of Atlantic salmon, which owns a process. Additionally, this has allowed Australis Mar S.A. and Piscicultura freshwater smolts, which already had 10 With only 5 years of life since entering genetics program of recognized quality. guiding efforts in order to develop an Río Maullín SpA, in turn, agreed to years of experience. the growout business, in 2011 Australis This agreement contemplated, on the increasingly sustainable operation. purchase the Pesquera Torres del Paine Seafoods was a major player in the one hand, the signing of a long-term Limitada processing plant, located In 2007 Australis Mar S.A. was Chilean salmon industry, reaching a contract for the supply of eggs by The year 2018 was marked by the in the city of Punta Arenas, thus founded, when making the decision production of more than 30,000 gross Aquagen and, on the other, the transfer strengthening of operations in increasing the company's production to expand Australis S.A.'s activity to tons that year, with industry leading by the subsidiary of Australis Seafoods the Magallanes Region, which was capacity by more than 8,900 WFE growing out seawater smolts. In this profitability. Based on this, and the S.A. Landcatch Chile S.A. to Aquagen, accompanied by significant investments tons per month. way, Australis Mar S.A. would be in company's productive growth plan, it of its genetics and reproduction in infrastructure and which resulted in charge of grouping all the activity of was decided that it would be listed on program, consisting of broodstock and a production equivalent to 51% of the Finally, Australis Mar achieved its salmon growout in sea water while the Santiago Stock Exchange, a process two fish farms specially conditioned 58,865 tons of WFE raw material that largest historical harvest with 71,976 Australis S.A. grouped the operation that ended successfully, with a demand for the incubation of eggs. In this way, the Company harvested during the tons WFE during 2019, with excellent of raising smolt in fresh water in their 70 times greater than the offer of its Landcatch Chile S.A. began to dedicate year. sanitary results and a decrease in the fish farms. The integrated operation of papers. itself exclusively to the production rates of antibiotic use of more than 13% both companies generated the need to of alevins and freshwater smolts, In 2019 Australis Seafoods changes in relation to 2018 and more than 80% create a parent company that brings In 2013, Australis Seafoods S.A. henceforth being called Australis Agua its main controller, becoming part in 2015. together all aquaculture activities. In acquired the company Congelados y Dulce S.A., thus achieving efficiencies of the Chinese business holding order to give a business group structure Conservas Fitz Roy S.A. through which and competitive advantages in the company, Lenovo Holdings Group, ANNUAL HARVEST to all the activities of the Company, it acquired the Fitz Roy secondary production of quality smolts. which, through an “OPA” offered on (Tons WFE) the parent company Australis Seafoods processing plant. In addition, during the Santiago stock exchange, acquires S.A. is incorporated, which groups that year it invested in expanding In 2016, the opening of a subsidiary in 99.86% of the company's shares. 7 0.000 Australis Mar S.A. and Australis S.A. the plant's cold stores, increasing its the United States, called Trapananda (highlighted text) 60.000 capacity to more than 1,000 tons. Seafarms, materializes, allowing During 2009, Australis Seafoods Since its purchase to date, Fitz Roy has more direct commercialization within Given the above and due to a new 50.000 purchased the company Landcatch been used to process more than 70% of that market, and the increase in the commercial strategy Australis Seafoods Chile S.A. in order to ensure the supply the company's production. processing capacity of the Fitz Roy abandons the “New World Currents” 40.000 of Atlantic salmon eggs, due to the plant. consortium that it formed in 2013 uncertainty in the industry regarding During the same year, Australis together with other salmon farms to 30.000 the import capacity of third-party eggs. Seafoods, together with three other The last years have been of export salmon to the Chinese market, 20.000 In this way, the company integrates industry players, founded the “New consolidation for the Australis group. leaving this segment directly in charge the genetics and reproduction of World Currents” consortium, which The productive strategy has favored of the subsidiary Joyvio Foods. 10.000 this species in its value chain. The aims to develop the Chinese market. maintaining a stable harvest level Landcatch Chile S.A. company grouped over time, the health results show In early 2019, construction began on 0 all the company's fresh water activity, The following year, the company signs important advances in the control of the new Dumestre Processing Plant, 2013 2014 2015 2016 2017 2018 2019 28 AUSTRALIS SEAFOODS CORPORATE GOVERNANCE 29
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BOARD
In accordance with the Company's Articles of Association and current regulations, EXISTING DIRECTORS AS OF DECEMBER 2019: the Board of Directors is made up of 7 members, who hold office for a period of three years, at the end of which all its members will cease in their functions, Rafael Fernández Morandé, national identity card number 6.429.250-1, civil engineer. Director, notwithstanding that the board of shareholders may indefinitely re-elect one or elected on April 26, 2016. more of them. The Company's management does not consider alternate directors. According to the Articles of Association of the Company, it is managed by 5 Isidoro Quiroga Moreno, national identity card number 6.397.675-k, civil engineer. Director, directors. However, given that the Company has voluntarily submitted to the rules of elected on April 26, 2016. article 50 bis of the Corporations Law, the Company must have 7 directors. Jie Tang, Chinese Passport number EA3694639, commercial engineer. Director and President, At the end of the 2019 fiscal year, the Company's Board of Directors was composed assumes the position on July 1, 2019, until the next ordinary shareholders' meeting. of 7 regular members. Shaopeng Chen, Chinese passport number E60330706, engineer. Director, assumes the position on July 1, 2019, until the next ordinary shareholders' meeting.
Jianhua Chen, Chinese Passport number EG5340472, commercial engineer. Director, assumes BOARD AND ADMINISTRATION the position on July 1, 2019, until the next ordinary shareholders' meeting. In the last two years, the following people have been part of the Board: Lin Ji, Chinese passport number EF203128, international trade. Director, assumes the position on July 1, 2019, until the next ordinary shareholders' meeting. Martín Guiloff Salvador, national identity card number 12.661.579-5, civil engineer. Director and President, elected on April 26, 2016, and appointed President of the Board of Directors on May Shichao Dong, Chinese passport number EG0002052, accountant. Director, assumes the 30, 2016. position on July 1, 2019, until the next ordinary shareholders' meeting. María Victoria Quiroga Moreno, national identity card number 5.882.623-5, commercial engineer. Director, elected on April 26, 2016.
Isidoro Quiroga Cortés, national identity card number 16.371.671-2, civil engineer. Director, elected on April 26, 2016, and appointed Vice President of the Board of Directors on May 30, 2016. DIRECTORS COMMITTEE
Adrián Fernández Rosemberg, national identity card number 8.080.233-1, civil engineer. The Company has formed a committee of directors on a voluntary basis. Director, elected on April 26, 2016. Until July 2019, and during the last two years, the directors' committee has been María Dolores Quiroga Moreno, national identity card number 7.752.150-k, medical technologist. made up of Rafael Fernández Morandé, Adrián Fernandez Rosemberg, María Victoria Director, elected on April 26, 2016. She submitted her resignation to the board on May 3, 2018. Quiroga Moreno.
Benjamín Quiroga Cortés, national identity card number 17.087.605-9, civil engineer. Director, As of July 2019, the directors' committee is made up of Messrs. Rafael Fernández elected on May 3, 2018. Morandé, Jianhua Chen and Ms. Lin Ji. 32 AUSTRALIS SEAFOODS CORPORATE GOVERNANCE 33
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ADMINISTRATION REMUNERATIONS
In 2019, the remuneration of the Company directors, in comparison with 2018, was as follows: BOARD Board Remuneration REMUNERATIONS GENERAL MANAGER Name Position 2019 2018 ADMINISTRATION Remuneration Remuneration
The total amount for remuneration for
ADMINISTRATION AND COMMERCIAL CORPORATE FARMING OPERATIONS PLANT AND LEGAL AND DEVELOPMENT LOGISTICS Martín Abraham Guiloff Salvador President 17.500.000 25.650.000 the main executives in 2019 reached FINANCE MANAGER MANAGER AFFAIRS AND MANAGER AND PROJECTS PROCESS REGULATORY AND MANAGER HUMAN RESOURCES MANAGER MANAGER AFFAIRS MANAGEMENT US$ 4.169.949,2, while in the same MANAGER MANAGER CONTROL period of 2018 this amount reached US MANAGER Adrián Fernández Rosemberg Director 15.000.000 27.603.000 SUPPLY MANAGER $ 4,053,689. Regarding compensation FRESHWATER Isidoro Ernesto Quiroga Moreno Director 25.000.000 22.050.000 MANAGER plans, the main executives have incentives valued based on the Isidoro Quiroga Cortés Director 17.500.000 17.550.000 evaluation of their performance and / or María Victoria Quiroga Directora 17.500.000 21.600.000 the financial result of the company, at the end of the year. Ricardo Misraji Vaizer Rubén Henríquez Núñez Rafael Fernández Morandé Director 30.000.000 27.602.998 General Manager Legal and Regulatory Affairs Manager Commercial Engineer, Pontificia Universidad Católica de Chile Lawyer, Pontificia Universidad Católica de Valparaíso The Company does not consider María Dolores Quiroga Moreno Director - 5.400.000 MBA, University of Cambridge (UK) Master's degree in Administrative Law, Pontificia Universidad Católica de Valparaíso payments based on stock options. The Appointment Date: July 30, 2013 Appointment Date: July 17, 2013 Benjamín Quiroga Cortés Director 15.000.000 13.500.000 average gap between men and women reaches 26% more in men than in Moisés Benjamín Saravia Ortiz Gerardo Ernesto Crot Rebolledo Jie Tang Presidente - - Administration and Finance Manager Plant and Process Manager women at the executive level, at the Civil Industrial Engineer, Pontificia Universidad Católica de Chile Food Engineer, University de La Frontera professional level it is 6% higher for MBA, London Business School (UK) Appointment Date: January 4, 2016 Shaopeng Chen Director - - Appointment Date: March 17, 2014 women and 28% in favor of men at the Jianhua Chen Director - - technical level and operators.
Derek Kohn Bruggemann Santiago Octavio Garretón Sánchez Lin Ji Director - - Commercial Manager Development and Management Control Manager Commercial Engineer, Pontificia Universidad Católica de Chile Civil Industrial Engineer, Pontificia Universidad Católica de Chile Appointment Date: June 15, 2015 Appointment Date: June 19, 2017 Shichao Dong Director - -
Josefina Moreno Tudela Fernando Silva Villanueva Corporate Affairs and Human Resources Manager Supply Manager Lawyer, Universidad Adolfo Ibáñez Public Accountant and Auditor, Universidad de la Frontera Master's degree in Business Law, Universidad Adolfo Ibáñez Appointment Date: July 1, 2019 Master's Degree in Labor Law, Universidad Adolfo Ibáñez Appointment Date: Monday, November 14, 2016
Claudio Andrés Figueroa Lizana Cristián Sauterel Rodríguez Freshwater Production Manager Farming Manager Veterinary Doctor, Universidad Austral de Chile Veterinary Doctor, University Católica de Temuco MBA, Universidad Diego Portales Appointment Date: December 23, 2013 Appointment Date: July 3, 2017
Adriano Vittorio Cabrini Fernández Ignacio Bravo Herreros Operations and Projects Manager Logistics Manager Civil Industrial Engineer, Pontificia Universidad Católica de Chile Industrial Civil Engineer, Universidad de los Andes. Appointment Date: June 1, 2018 Appointment Date: April 1, 2019
*This is the adjusted salary gap, the difference between the salary average of men and women for each level described. 34 AUSTRALIS SEAFOODS CORPORATE GOVERNANCE 35
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The total remuneration of the directors corresponds to attendance allowances at DIVERSITY WITHIN THE COMPANY Board meetings. During the 2019 fiscal year, the Board of Directors hired Credicorp Capital for the amount of 2000 UF, equivalent to CLP$56.130.700. Australis has a group of collaborators, who work day by day to achieve ever better and more sustainable standards in our operation. As of December 31, 2019, there are In 2019, the remuneration of the members of the Company Directors Committee, in 2,373 people who make up the organization, which are distributed as follows. comparison with 2018, was as follows: Diversity Indicators
BOARD MANAGERS 1 ORGANIZATION 2 Directors' Committee Remuneration N ° Women 1 5 766 GENDER Name Position 2019 2018 N ° Men 6 41 1561 Remuneration Remuneration Chilean 2 43 2194 NATIONALITY: Rafael Fernández Morandé Presidente 4.500.000 3.600.600 Foreigners 5 3 133 Under 30 years 1 677 María Victoria Quiroga Miembro 2.250.000 4.203.000 Between 30 and 40 years 2 23 801 Adrián Fernández Rosemberg Miembro 2.250.000 3.452.400 AGE Between 40 and 50 years 2 15 559 Between 50 and 60 years 3 6 255 Jianhua Chen Miembro - - Between 60 and 70 years 1 35 Lin Ji Miembro - - Under 3 years 5 18 1704 TIME OF Between 3 and 6 years 2 19 392 PERMANENCE Between 6 and 9 years 9 171 The total remuneration of the members of the Directors Committee corresponds to AT THE the diet of attendance to its sessions. COMPANY Between 9 and 12 years 49 Over 12 years 11
The following tables detail the number of workers, according to the Australis group company and type of position, at the end of 2018 and 2019.
2019 ASF AMSA Fitz Roy Trapananda Retail Torres del Paine Total EXECUTIVES 3 43 2 1 0 0 49 PROFESSIONALS AND TECHNICIANS 0 166 25 9 3 10 213 ADMINISTRATIVE AND OPERATORS 1 809 743 0 7 551 2111 TOTAL 4 1018 770 10 10 561 2373
2018 ASF AMSA Fitz Roy Trapananda Retail Total EXECUTIVES 3 33 3 1 0 40 PROFESSIONALS AND TECHNICIANS 0 443 178 8 1 629 ADMINISTRATIVE AND OPERATORS 1 367 563 0 3 934 TOTAL 4 843 744 8 4 1603
1 This item considers managers and assistant managers. 2. Directors aren't considered within the staff. 36 AUSTRALIS SEAFOODS CORPORATE GOVERNANCE 37
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ANNUAL MANAGEMENT REPORT OF THE DIRECTORS COMMITTEE
SANTIAGO, 27TH MARCH 2020 AUSTRALIS SEAFOODS S.A. REGISTERED UNDER NO. 1074
I. BACKGROUND carried out the following actions: of the Company’s corporate interest, V. REMUNERACIÓN DE SUS to continue enforcing the controls the related-party operation was MIEMBROS. pertaining to the transactions This report is issued in accordance (i) It examined in detail the reports of beneficial for the Company and that referenced under Title XVI of the Law with Article 50 Bis of the LSA, the external auditors, the reasoned it was consummated at arm’s length En Junta Ordinaria de Accionistas on Corporations. which provides that the Directors analyses, balance sheets and other conditions and at market price, as per celebrada con fecha 25 de abril de Committee must issue an annual report financial statements, on a quarterly the terms specified in such report. 2019, la Sociedad acordó como • Furthermore, the Committee also on its management, including main and annual basis, as made available by remuneración de los miembros recommends reviewing the issues recommendations to shareholders. the Company's management, making (iv) The Directors Committee also del Comité de Directores la suma notified by the External Auditors a pronouncement on them prior to examined in detail the internal de $834.000 por cada sesión a in the Internal Control Letter, their assessment by the Board of control letter submitted by the la que asistan durante el ejercicio particularly those pertaining to the II. COMPOSITION OF THE Directors and prior to their submission External Auditors to the Company’s 2019, equivalente a un tercio de la differences in inventories of food in COMMITTEE AND MEETINGS to the shareholders for their approval, board of directors, highlighting the remuneración pagada a cada director certain fish farms, measured by the carefully analyzing the different aspects work performed during the year, por asistir a una sesión ordinaria o Company’s two systems of control Until July 2019 the Directors contemplated in them. their findings, the answers from mensual. Del mismo modo, en dicha and feeding. Even though said issue Committee was composed of Rafael management, and the progress status Junta se aprobó un presupuesto was minor as of this date, it could Fernández Morandé, Adrián Fernández (ii) After considering economic offers of the previous year’s findings. de gastos equivalente a la suma de entail a risk. Rosemberg and María Victoria Quiroga and their strengths and weaknesses, it las remuneraciones anuales de los Moreno. After that date, the Directors made a list of selected external audit (v) The Committee also executed directores miembros del Comité. Committee has been composed of firms and furnished it to the Board all other matters stipulated in the Rafael Fernández Morandé, Jianhua of Directors for their proposal to the corporate bylaws or entrusted to it VI. GASTOS DEL COMITÉ Chen and Lin Ji. ordinary shareholders meeting; by the shareholders meeting or the Company’s board of directors. The Directors Committee did not incur During the 2019 fiscal year, the (iii) It took notice of a transaction in any expenses during year 2019. Committee met seven times. The between related parties consisting of minutes of each of those meetings the provision of guarantees to secure IV. SPECIFICATION OF RELATED- were duly signed by all the members compliance with the obligations PARTY OPERATIONS. VII. PRINCIPALES who attended them, as well as by the assumed by the Company’s parent RECOMENDACIONES. Rafael Fernández Morandé Secretary. company, Food Investment SpA, During financial year 2019, the Chairman within the framework of a credit facility Committee was informed about Regarding the recommendations that agreement between the latter and the performance of an operation of the Committee has resolved to propose III. GENERAL ASPECTS OF THE the Bank of China Limited, Macau those established in Title XVI of the to the board of directors via this COMMITTEE’S MANAGEMENT Branch. In this regard, and pursuant to LSA, consisting of the furnishing of Report, such recommendations are the DURING FISCAL YEAR 2019. the provisions of article 50 bis of the guarantees in favor of parent company following: Lin Ji Law on Corporations, the Directors Food Investment SpA, as specified During fiscal year 2019, the Directors Committee sent a report regarding above. • Regarding the recommendations Committee met regularly, and using its the aforementioned transaction, issued during the previous financial powers and fulfilling its legal duties, it indicating that, from the perspective year, the Committee recommends Jianhua Chen 38 AUSTRALIS SEAFOODS CORPORATE GOVERNANCE 39
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INFORMATION ON RELEVANT OR ESSENTIAL FACTS
During 2019, the main essential facts disclosed were the following:
I.- By means of an essential fact dated indicated therein, BJ could acquire of the Company between June 30, of Australis Seafoods S.A., with the Notwithstanding this, it was reported rules of article 50 bis of Law 18.046 February 28, 2019, it was reported as through an OPA process, up to 100% 2018 and the date of balance according companies Asesoría e Inversiones that the agreed price amounts to US on Public Limited Companies, with the an essential fact that: of the shares issued by the Company. to which the adjustment will be made, Cathoms Limitada and Inversiones $ 26.5 million, which is subject to appointment of a board consisting of under the terms established in the Sale. Aneto Limitada, signed a purchase and adjustments of this type of contract, 7 members, an independent director (i) On November 18, 2018, the (iv) The Purchase and Sale contract Assuming that there were no price sale agreement subject to condition, and that it will be financed through and a Directors’ Committee. By Company reported as an essential is subject to compliance with the adjustments and that the number of on all the social rights that make up bank debt. virtue of this agreement, Mr. Rafael fact that Inversiones ASF Limitada, conditions indicated therein, which shares subscribed and paid does not the capital of the company Pesquera Fernández Morandé was appointed Asesoría e Inversiones Benjamín S.A., must be fulfilled no later than April 29, vary prior to the launch of the OPA, Torres del Paine Limitada, unique tax as the independent Director of the Inversiones Ruiseñor Dos Limitada and 2019, a period that may be extended the price to pay would amount to US $ number 96,524,510-3 (hereinafter III.- By means of an essential fact dated Company. Likewise, the proposal for Inversiones Arlequín Dos Limitada (the for the 45 days following that date 0.12892474779 per share. the "Transaction"). The Transaction is April 25, 2019, it was reported as an the remuneration of the members of “Shareholders”) had entered into a in accordance with the purchase subject to the fulfillment of various essential fact that: the Directors’ Committee for the 2019 promise of sale agreement of Company and sale contract. Basically, these (vi) By virtue of the communication common suspensive conditions in this (i) The 2018 Corporate Memory, financial year was approved. shares with Joyvio Group Co., Ltd. conditions consist of the authorization referred to in number (iii), the type of contract. the Balance Sheet, the Financial ("Joyvio") by virtue of which, subject of the Transaction by the Chinese Shareholders requested the Chairman Statements and the report by the (v) PriceWaterhouseCoopers to the terms and conditions indicated governmental authorities and by the of the Board of the Company to (ii) By virtue of the Transaction, external audit company, corresponding Consultores, Auditores y Compañía therein, Joyvio could acquire, through free competition authorities in Chile, inform the Board of this circumstance and in case of materialization in the to the fiscal year ended on December Limitada was appointed as the external a public tender process of acquisition Brazil, the United States of America and, if he deems it appropriate, to agreed form, Australis Mar S.A. and 31, 2018, were approved. audit company for the 2019 fiscal year. of shares (the "OPA"), up to 100% of and Russia. Once all these conditions communicate this circumstance in Piscicultura Río Maullín SpA, will the shares issued by the Company (the have been met, the OPA would be the character of essential fact to the acquire control of Pesquera Torres (ii) Considering that in May 2018, (vi) Knowledge was taken of the "Transaction"). launched within the following ten Commission for the Financial Market. del Paine Limitada, and with it, the one of the members of the Company operations regulated in Title XVI of the business days, which will not be subject operation of a processing plant located Board of Directors resigned his post, LSA. (ii) Pursuant to the aforementioned to conditions of success or grounds for (vii) By means of an extraordinary in the city of Punta Arenas, allowing it the Board of Directors was completely essential fact, the celebration of the expiration. session of the Board of Directors to improve its processing capacity for renewed, and the following directors (vii) Diario La Nación was designated promised sale was subject to a series held on this same date, the Board of salmonid species farmed in the area, were elected: as the newspaper to publish notices of conditions, including that Joyvio has (v) The price to be offered in the OPA Directors of the Company became which should produce positive effects of summons to future shareholders' completed a satisfactory due diligence for all the shares subscribed and paid aware of the aforementioned on the Company's consolidated results. - Isidoro Quiroga Moreno meetings. process for the company and its for by the Company will be, subject to communication and of the signing (iii) Regarding the financial effects - Isidoro Quiroga Cortés subsidiaries. the adjustments referred to below, US of the Purchase and Sale agreement of the Transaction, it was reported - María Victoria Quiroga Moreno (viii) Other matters pertaining to this $ 880,000,000 (eight hundred and in the aforementioned terms, and that it was not possible to make an - Martín Guiloff Salvador type of shareholders' meeting were (iii) On February 28, 2019, the eighty million United States dollars), unanimously approved its members estimate at this stage of the operation. - Adrian Fernández Rosemberg discussed. Shareholders have informed the payable in dollars of the United States to inform the Commission for Notwithstanding this, it was reported - Benjamín Quiroga Cortés Company that having Joyvio of America or its equivalent in pesos, the Financial Market about these that the agreed price amounts to US - Rafael Fernández Morandé satisfactorily completed its due legal currency, according to the value circumstances. $ 26.5 million, which is subject to IV.- By means of an essential fact dated diligence process, on this same of the dollar observed on the date of adjustments of this type of contract, (iii) The Board's remuneration proposal June 13, 2019, it was reported that: date they signed with Joyvio and payment, at the choice of the OPA and that it will be financed through for the 2019 fiscal year was approved, its subsidiary, BJ Joyvio Zhencheng recipients. The Purchase and Sale II.- By means of an essential fact dated bank debt. taking note of the absence of expenses (i) On February 28, 2019, the Technology Co., Ltd. ("BJ"), a shares contemplates that the aforementioned February 28, 2019, it was reported as by the Board during the 2018 fiscal Company had reported as an essential purchase agreement called "Australis price will be adjusted before the launch an essential fact that: (iii) Regarding the financial effects year. fact that Inversiones ASF Limitada, Seafoods S.A. Shares Purchase of the OPA, among others, by virtue of of the Transaction, it was reported Asesoría e Inversiones Benjamín S.A., Agreement" (the "Sale") under which, the variations experienced by the net (i) Australis Mar S.A. and Piscicultura that it was not possible to make an (iv) The proposal was approved to keep Inversiones Ruiseñor Dos Limitada subject to the terms and conditions financial debt and the working capital Río Maullín SpA, both subsidiaries estimate at this stage of the operation. the Company voluntarily adhered to the and Inversiones Arlequín Dos Limitada 40 AUSTRALIS SEAFOODS CORPORATE GOVERNANCE 41
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(the “Shareholders”) together with BJ Purchase Agreement) for all the the Securities Market Law during the dated July 4, 2019, it was reported Transaction, the price paid to Sellers and subject to the laws of England, for a Joyvio Zhencheng Technology Co., Ltd. shares subscribed and paid for by the entire period of the OPA. that as of July 1, 2019, the new amounts to US $ 26.5 million, which is principal amount of up to one hundred (“BJ”) and with Joyvio Group Co., Ltd. Company would be US $ 921,624,000 administrative address of Australis subject to adjustments in this type of and sixty million dollars of the United (“Joyvio”) had entered into a Contract (nine hundred twenty-one million six Seafoods S.A. would be as follows: contract. States of America (“Dollars”). of Purchase and Sales of Company hundred twenty-four thousand dollars VI.- By means of an essential event Decher 161, commune and city of Shares called “Australis Seafoods of the United States of America), dated July 1, 2019, it was reported Puerto Varas. It was reported that the Credit S.A. Stock Purchase Agreement” payable in dollars of the United States that, in an extraordinary session of the IX.- By means of an essential fact Agreement has various tranches, (the “Purchase Agreement”) by of America or its equivalent in pesos, board meeting held on the same date, dated July 29, 2019, Food Investment aimed at (i) modifying, restructuring virtue of which, subject to the terms legal currency, according to the value the directors, Messrs. Isidoro Quiroga VIII.- By means of an essential event SpA (“Food Investment”) declared and recasting the export credits and conditions indicated therein, BJ of the dollar observed on the date Cortés, Benjamín Quiroga Cortés, dated July 10, 2019, it was reported the Public Offer for the Acquisition (PAEs) that Australis Mar S.A. owes could acquire, through a process of of payment, at the choice of the Martín Guiloff Salvador, María Victoria that in relation to the essential event of Shares of Australis Seafoods S.A., to BOC Macau, on the occasion public offering of acquisition of shares OPA recipients. This implied that the Quiroga Moreno and Adrián Fernández dated February 28, 2019, by which which it launched on June 26, 2019 of the assignment of credits, rights (the “OPA”), up to 100% of the price to be paid for each share of the Rosemberg had presented their Australis Seafoods S.A. reported that (the “Offer”), by publishing the notice and obligations, made by DNB Bank shares issued by the Company (the Company in the OPA would amount to resignation from their positions. Taking its subsidiaries Australis Mar S.A. provided in article 212 of the Securities ASA, Cooperative Rabobank UA and Transaction"). 0.1350228883635537 United States note of each of these resignations, the and Piscicultura Río Maullín SpA Market Law (the “Notice of Result”). Banco Santander Chile in favor of dollars. Board accepted them and appointed (the “Buyers”) had entered into a BOC Macau, dated July 5, 2019, and (ii) As permitted by the Purchase in their replacement the directors, contract with the companies Asesoría In accordance with what was indicated which will be consolidated into a single Agreement, BJ transferred its Messrs. Jie Tang, Shaopeng Chen, e Inversiones Cathoms Limitada in the Notice of Results, during loan under the Credit Agreement, (ii) contractual position under it to its V.- By means of an essential fact dated Jianhua Chen, Lin Ji and Shichao Dong, and Inversiones Aneto Limitada (the the validity of the Food Investment refinance other financial debts in force subsidiary Food lnvestment SpA. June 27, 2019, it was reported that the respectively, all of whom took due “Sellers”), pursuant to which the Buyers Offer, acceptances were received for of Australis Mar S.A., and (iii) finance This, notwithstanding the fact that company FOOD INVESTMENT SPA account of the appointment and they had agreed to the sale of all the social 6,814,640,680 (six thousand eight other general corporate purposes, Joyvio remains jointly and severally published a notice of commencement accepted the position in accordance rights of Pesquera Torres del Paine hundred fourteen million six hundred working capital needs of Australis Mar responsible with said subsidiary for the of the Public Offer for Acquisition with the Law. Consequently, the Board Limitada, owned by the Sellers, being forty thousand six hundred and eighty) S.A. and other related companies, and fulfillment of its obligations under the of up to 100% of the shares issued of Directors of the Company was made aware that since all the conditions Australis shares, equivalent to 99.838% the financing of its exports. Purchase Agreement (including without by the Company, in accordance with up of Messrs. Jie Tang, Shaopeng Chen, precedent pending the completion (ninety-nine point eight hundred and limitation, the launch of the OPA the provisions of article 201 of the Jianhua Chen, Lin Ji, Shichao Dong, of said contract were fulfilled, on July thirty-eight percent) of the ordinary It was noted that, on the occasion and the payment of the price offered Securities Market Law (the “OPA”), Isidoro Quiroga Moreno and Rafael 10, 2019, the parties materialized the shares, of a single series and without par of the Credit Agreement, Australis therein). in the electronic newspapers El Fernández Morandé. transfer of said social rights. value, fully subscribed and paid from Mar S.A. must pay ordinary and penal Mostrador.cl and La Nacion.cl. that company, which Food Investment interest, commissions, expenses, taxes (iii) All the conditions contemplated Likewise, taking the foregoing into By virtue of the foregoing, Australis accepted and acquired for itself. and cost increases, made declarations in the Purchase Agreement for the It was stated that, according to account, it was reported that the Board Seafoods S.A. acquired indirect and guarantees that are habitual in launch of the OPA were fulfilled. the notice of initiation of the OPA of Directors agreed to appoint Mr. control of Pesquera Torres del Paine this type of contract, and assumed Therefore, in accordance with its terms referred to above, in accordance with Jie Tang as Chairman. Likewise, it was Limitada, and with it the operation of X.- By means of essential facts dated those obligations to do and not to do, and conditions, Food lnvestment SpA the provisions of the relevant legal agreed that the Company's Directors its processing plant located in the city August 2, 2019, Australis Mar S.A., a causes of early enforceability and other was required to publish the respective regulations, the OPA would extend Committee will be made up of the of Punta Arenas, allowing it to improve subsidiary of the Company, signed, as a habitual obligations and commitments notice of commencement of the OPA between June 27 and July 26, both independent director, Mr. Rafael its processing capacity of salmonid debtor, with the Bank of China Limited, for operations of this nature and scope. on a date no later than June 27, 2019. dates inclusive. In this regard, Australis Fernández Morandé, and the Directors species farmed in the area, which Macau Branch (“BOC Macau”), as The obligations assumed under the Seafoods S.A. made available to the Jianhua Chen and Lin Ji. should produce positive effects on the creditor and agent bank, a term and Credit Agreement are guaranteed (iv) The price to be offered by public at the Company's offices and on consolidated results of the Company. revolving credit agreement called Term with a pledge on the funds deposited Food Investment SpA in the its website, a copy of the prospectus of and Revolving Facilities Agreement in a reserve bank account of Australis OPA (adjusted as indicated in the the OPA referred to in article 203 of VII.- By means of an essential fact Regarding the financial effects of the (the "Credit Agreement"), in English Mar S.A. with BOC Macau, and with 42 AUSTRALIS SEAFOODS CORPORATE GOVERNANCE 43
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the personal, solidary, irrevocable ensure the payment of obligations of Limitada and Procesadora de Alimentos of the Company's shareholders had and unconditional guarantee of Food third parties that are not subsidiaries, Australis SpA) to guarantee obligations been called to be held at 9:00 a.m. on Investment SpA, parent and indirect the amount of which exceeds 50% contracted by a third party that is not January 30, 2020, at Av. Presidente owner of Australis Mar S.A. of the assets of ASF, its granting is a subsidiary of the Company, namely Riesco 5711, office 1603, Las Condes, also subject to prior approval at an Food Investment SpA, in compliance Santiago, to deal with the following extraordinary meeting of shareholders, with the provisions of articles 57 N°5 matters (the "Board"): XI.- By essential fact dated September in accordance with the provisions of and 67 N°11 of Law N°18.046, on 27, 2019, it was reported that the article 67 No. 11 of the Public Limited Public Limited Companies. (1) Voluntary cancellation of the Board of Directors of the Company Companies Law. registration of the Company and its approved the granting of a bond and As a result of the foregoing, and shares in the Securities Registry kept joint debt by ASF (the “Bond”), to In view of the foregoing, the Board pursuant to article 69 of the same by the Commission for the Financial ensure the payment of the obligations of Directors agreed to call an law, a period began for the exercise Market: and assumed by Food Investment SpA, Extraordinary Shareholders Meeting of the right of withdrawal by dissident parent company and controller of ASF, to be held at 9:00 a.m. on Friday, shareholders, upon payment of the (2) All those complementary matters in the credit agreement it entered into October 18, 2019, at the premises of price of their shares, as indicated necessary for the implementation with Bank of China Limited, Macau the Best Western Marina Las Condes below. The value per share to be paid of the agreements of the referred Branch (“Bank of China”) for a total Hotel, located at Avenida Alonso to those shareholders who exercise the meeting. amount of US $ 450 million (the de Córdova No. 5727, Las Condes right of withdrawal would be calculated “Credit Agreement”). District. In this regard, it is noted that in accordance with the provisions It was announced that those the eventual approval of said matter will of article 69 of the Public Limited shareholders who are registered in Likewise, it was noted that the granting grant dissident shareholders the right Companies and article 132 of its the Company shareholders log will of a pledge was authorized on all to withdraw, in accordance with the Regulations. have the right to participate in the the shares issued by the subsidiaries provisions of article 69 of the Law on Meeting, at midnight of the fifth Australis Mar S.A., Australis Agua Corporations. It was stated that the information business day prior to the date of the Dulce S.A., and Congelados y regarding the exercise of the right of Meeting. Likewise, in accordance with Conservas Fitz Roy S.A., whose parent withdrawal would be communicated by the provisions of article 2, subsection and controller is ASF, to ensure the XII.- By means of an essential event means of a prominent notice published 6 of Law N°18,046, on Public Limited payment of the obligations of Food dated October 18, 2019, it was in the “Diario La Nación” and on the Companies, if the matter indicated Investment SpA under the Credit reported that at the Extraordinary Company's website www.australis- in No. (1) above is approved, the Agreement. Additionally, the granting Shareholders Meeting of the Company seafoods.com, in addition to which it shareholders who express their dissent of other real and personal guarantees to held on that date, the constitution would send a written communication in accordance with the applicable legal be granted by different ASF subsidiaries of real and personal guarantees was addressed to shareholders with the right and regulatory standards may exercise was authorized. The aforementioned approved, in accordance with the to exercise dissent at the address they their right to withdraw from the guarantees have been considered an quorums required by law, of the have registered with the Company. Company. operation of related parties, therefore Company and its subsidiaries (Australis being approved with the unanimity Mar SA, Australis Agua Dulce SA, Finally, it was indicated that the of the directors not involved in the Congelados y Conservas Fitz Roy SA, XIII.- By means of an essential event qualification of powers, if applicable, operation. Pesquera Torres del Paine Limitada, dated October 18, 2019, it was will be carried out on the same day and Piscicultura Río Maullín SpA, Salmones reported that, pursuant to what was place of the Meeting, between 8:30 In this regard, it was reported that Islas del Sur Limitada, Acuícola agreed by the Company's Board of am and the start time of the Meeting. since the guarantees referred to above Cordillera Limitada, Salmones Alpen Directors, an extraordinary meeting 44 AUSTRALIS SEAFOODS THE SALMON INDUSTRY 45
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THE SALMON INDUSTRY 46 AUSTRALIS SEAFOODS THE SALMON INDUSTRY 47
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EL PRODUCT
Salmon is a globally consumed product, Salmon production has a low carbon proteins is in aquaculture. Salmon is and increasingly accessible and famous footprint and lower water consumption, will be an essential part of tomorrow's for its flavor and the large number of which translates into a lower diet. nutrients such as proteins, vitamins environmental impact when compared and Omega 3, mainly. Thanks to the to other animal proteins farmed in various markets and retail trade, it has rearing conditions. In relation to the positioned itself as a more common above, it is important to also note that consumer product, reaching a diverse by 2050, we will be almost 10 billion number of households who previously people on earth, and the answer to thought of it as a luxury good. feeding a world population that grows day by day and that needs healthy The vitamins present stand out for their antioxidant properties and benefits for sight, metabolism and the absorption Nutritional information for farmed Atlantic salmon of Calcium, among others. On the based on a half fillet (178g) portion 68% other hand, various studies link the VITAMIN B12 83% (4,98mcg) consumption of Omega-3 with the PROTEINS 79% (39,34g) prevention of cardiovascular diseases, DEL PESO DEL VITAMIN B6 58% (1.152mg) benefits for the joints and decreased SALMÓN ES risk of various types of cancer. COLESTEROL 37% (112mg) TOTAL FAT 34% (21,98g) Despite the fact that salmon farming COMESTIBLE POTASIO 20% (684mg) started experimentally only in the MAGNESIO 1960s, and became a productive 13% (53mg) industry during the 1980s in Norway, VITAMIN C 11% (6.6mg)
today approximately 2/3 of world ZINC 5% (0,77mg) salmon production corresponds to SODIUM farming. 5% (109mg) CALCIUM 3% (27mg)
One of the great advantages of salmon VITAMIN A 2% (89IU) compared to the farming of other % Nutrition contribution bbased on a diet of 2000 caories per day. animals is its feed conversion factor Source: U.S. Food and Drug Administration (FDA) (FCR), which indicates the amount of feed that must be supplied to Feed Conversion Factor (FCR) Edible meat per 100 kg of food generate a weight gain of one kilogram. Furthermore, this conversion rate 6,8 68% is complemented by the fact that around 70% of the weight of salmon is 52% processed into edible meat, while for 46% other farmed animals this percentage 38% is around 50%. These two conditions 2,9 make salmon one of the most efficient 1,7 farmed animals in food transformation, 1,1 delivering around 68 kilograms of food for human consumption for every 100 kilograms of feed used. 11SALMON17CHICKEN 29PIG 68COW 68SALMON52CHICKEN46PIG 38COW Source: National Geographic Source: Bjørkl, J., Norwegian University of Life Sciences, Norway (2002) 48 AUSTRALIS SEAFOODS THE SALMON INDUSTRY 49
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THE OFFER:
The main producing countries of farmed Atlantic Salmon are Norway and Chile with In recent decades the growth of world salmon production has been based on an average production during the last years of 50% and 25% worldwide, respectively. aquaculture. The wild salmon catch has stabilized due to the species' limited capacity Furthermore, for both Pacific Salmon and Trout, Chile has been the main producer for sustainable renewal in its natural habitat. worldwide. This concentration is due to the climatic and oceanographic conditions that these countries have and that are essential for salmon farming. Given the above, the growth of salmon production worldwide has been mainly influenced by the development of aquaculture in Norway and Chile, the latter presenting a greater growth potential as it is a less mature industry. This potential is reflected in the sustained growth rate maintained by the Chilean industry before the 50% crisis caused by the ISA and which has recovered in recent years. NORWAY
Salmonids Production in Chile (Thousands of tons WFE) 1.000
800
600
400
200
0 2012 2013 2014 2015 2016 2017 2018 2019 25% CHILE Atlantic Trout Coho Source: Australis Seafoods
Evolution of World Atlantic Salmon Production by Country (Thousands of tons WFE) 1.400 Harvest of Atlantic Salmon by Harvest of Trout by country Harvest of Pacific Salmon 1.200 country year 2019 (%) year 2019 (%) by country year 2019 (%) 1.000
52% Norway 800 27% Chile 50% Chile 85% Chile 600 7% UK 35% Norway 15% Others 5% Canada 15% Others 400 3% Faroe Islands 6% Others 200
0 2014 2015 2016 2017 2018 2019 Source: ABG Sundal Collier Source: ABG Sundal Collier Source: ABG Sundal Collier Norway Chile UK Canada Faroe Islands Others Source: ABG Sundal Collier 50 AUSTRALIS SEAFOODS THE SALMON INDUSTRY 51
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THE DEMAND Destination Chilean Atlantic Salmon Destination Chilean Atlantic Salmon Exports 2019 Exports 2018
The growth of the world population, added to the increase in income in emerging 48% EEUU 45% EEUU countries, has led to a growth in the demand for healthy foods such as salmon. It is 22% Latin America 21% Latin America for this reason that new segments, relevant in terms of quantity of consumers, such 14% Asia without Japan 15% Asia without Japan as Brazil and Russia, have been incorporated into traditional salmon markets such as 9% Others 11% Others Europe, the United States and Japan. There has also been an increasing development 5% Europe 6% Europe of markets within Latin America and Asia such as China, Thailand, Korea, Colombia, 2% Japan 2% Japan Mexico, Argentina among others.
In the case of Chile, Salar exports have, as their main destination, the markets of the United States and Brazil. On the other hand, both Coho and Trout have, as their main Source: Infotrade Fuente: Infotrade destination, the Japanese market, although significant growth has been observed in the Russian and American markets.
Destination Chilean Trout Destination Chilean Trout
Destination of Chilean salmonid exports Exports 2019 Exports 2018
64% Japan 63% Japan 12% EEUU 15% EEUU 13% Others 12% Asia without Japan 9% Asia without Japan 9% Others 2% Latina America 1% Latin America 1% Europe
Source: Infotrade Source: Infotrade
Destination Chilean Pacific Salmon Destination Chilean Pacific Salmon Exports 2019 Exports 2018
81% Japan 83% Japan 10% Asia without Japan 10% Asia without Japan 4% Others 2% Latina America 3% EEUU 4% Other 2% Latin America 1% EEUU
Source: Infotrade Source: Infotrade 52 AUSTRALIS SEAFOODS THE SALMON INDUSTRY 53
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THE COMPETITION PRICES
In the main salmon producing countries, historically, there has been a Prices in the main markets during 2019 remained consistently above trend towards concentration of the number of participants. the average of the last 10 years, despite the fact that the world supply of salmon grew by 6.5% compared to 2018. The most striking case is that of the Norwegian industry, the number of companies that concentrated 80% of the production of farmed salmon increased from 70 to 23 between This situation accounts for the stability in demand and the valuation at the consumer level 1997 and 2017. In the case of Chile, this trend was broken in 2009, when an increase was of salmon as a healthy, tasty and versatile source of protein to consume in the most varied registered due to the entry of new players into the industry. However, considering the new preparations. Given the productive challenges inherent in the aquaculture activity to satisfy regulations and production system, the industry is expected to continue on a consolidation this growing demand, we estimate that prices will remain above the average of the last path such as the one carried out last year by the Agrosuper holding, in which the operations decade during this year and next. of the companies Aquachile, Los Fiordos, Friosur and Salmones Magallanes were merged.
UUEE, Trim D 3-4 lb.
Jan
2006 -2018 Max-min area Average 2006-2008
Source: Urner Barry 54 AUSTRALIS SEAFOODS THE SALMON INDUSTRY 55
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Norwegian export salmon benefited in part from the drop in supply in that country during Trout price remained stable during 2019, mainly due to a relatively flat world supply. the first half of the year, and in part from a demand that remains strong in two of its main The only exception was for Trim-E fillets which, due to the greater demand for this product destination markets: Europe and the United States. in previous seasons, led to inventory clearance in Japan that was reflected in a momentary drop in prices. Other than that, there was no major turbulence in the market for this Norway, 3-6 kg species.
Different was what was observed for the Coho Salmon, species that suffered a significant variation in prices during 2019. During the first half of the year, HG prices in Japan maintained the same enthusiasm seen in previous seasons, with prices very close to record highs. However, during the second semester the price fell steadily, mainly due to the increase in production in Chile and the accumulation of inventories in Japan of less desirable sizes. Japan, Coho 4-6 lb
Jan
2006 -2018 Max-min area Average 2006-2018 Source: Fish Pool
The Brazilian market, which is mainly supplied by salmon of Chilean origin, saw an increase of 10% in volume of whole Salar at the end of 2019 compared to 2018.
The whole Salar in fresh conservation represented 90% of the total whole Salar exported to Brazil, with annual growth of 12% in 2019. The latter, in turn contrasted with a decrease Jan in the annual weighted average price at the end of the year at U$/Kg 6.58 in 2018 to 6.12 U$/kg in 2019 (-7%). This increase in volume towards the market has been an opportunity 2007 -2018 Max-min area Average 2007-2018 Source: FIS for new importers to enter the category and in turn increase development in different states of Brazil. Japan, Trout 4-6 lb Brazil, Hon 10-12 lb
Jan Jan 2007 -2018 Max-min area Average 2007-2018 Source: FIS 2012 -2018 Max-min area Average 2012-2008 Source: Salmonex 56 AUSTRALIS SEAFOODS THE BUSINESS 57
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THE BUSINESS 58 AUSTRALIS SEAFOODS THE BUSINESS 59
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Australis's strategy has focused on developing alliances that allow it to further strengthen the different stages of the production chain. Positioning sustainable production as a central objective both in seawater, and in the breeding of quality alevins and smolts in freshwater. The company seeks to supply its production plant with the best raw materials, in an efficient and environmentally friendly way, to achieve products that meet the highest quality and safety standards.
BUSINESS DESCRIPTION
GENETICS AND FRESH WATER REPRODUCTION
The Company has identified The freshwater stage focuses on the genetics as a key element in incubation, rearing and growout process the performance of salmon in of alevins, to achieve their development seawater. Due to the above, it in smolts properly prepared for planting in maintains a long-term agreement seawater. with Aquagen for the supply of Atlantic salmon eggs. This alliance This process is carried out in around 35% allows the freshwater team to work in company-owned fish farms, which with one of the most recognized have high production and biosecurity genetics companies worldwide, standards, in order to guarantee the thus promoting key factors in the delivery of quality smolts for the growout new generations of salmon such as process. The remaining percentage is growth, meat color and resistance developed in facilities leased to other to diseases, among others. companies, always committed to ensuring a high standard of quality and reliability.
It should be added that the Australis Seafoods Group does not have lake or estuary concessions for the smoltification process, the production being concentrated in fish farms located on land, allowing greater control of the sanitary aspect of its production. 60 AUSTRALIS SEAFOODS THE BUSINESS 61
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SEAWATER PROCESS The sea phase corresponds to the last process of the farming, which consists of The processes designed by the company follow strict international standards of rearing and growing the fish out until they reach the weight required for their food safety and animal welfare. The process plants receive the raw material and processing and subsequent commercialization. The rearing and growout in this cycle, through the use of state-of-the-art technology and qualified workers, transform it extends from the entry of smolts in the different centers up to the harvest of the fish, into products with added value, according to the requirements of the clients in the which have an average weight of three to five kilos, depending on the species. This different destination markets. Our products are inspected and subjected to rigorous process is carried out in Australis’ own centers or leased from third parties, located in quality control and microbiological laboratory analysis during all stages of the process. the Los Lagos, Aysén and Magallanes regions. Once the plant process is finished, the products generated, both fresh and frozen, Annual production by species, for the last two years are stored in cold stores. From there, fresh produce is dispatched daily in refrigerated trucks directly to the final destination or to the airport. Meanwhile, frozen products Harvest (tons. WFE) 2018 2019 Variation 2018/2019 are kept in the cold stores until they are loaded in containers at -18°C, to be transported, mostly, by sea. Atlantic Salmon 53,248 59,595 12%
Rainbow Trout 5,617 11,539 105% Regarding the main costs associated with the production cycle, feed is the highest cost incurred in for salmon farming, both in freshwater and in the sea. There were two Coho Salmon 0 842 842% suppliers, both feed suppliers, which exceeded 10% of total purchases during 2019 individually, exceeding 25% jointly. Total 58,865 71,976 22%
In the sea centers, the fish are constantly monitored by the production team throughout the growout period, which can vary under normal conditions from 10 MARKETING AND DISTRIBUTION to 24 months inclusive, depending on the species, the production strategy and The developed products are marketed based on customer requirements, for which the geographic location. Monitoring considers all those variables that affect the the marketing strategy considers: development and growout of fish, such as their health status, growth, among others. Sales mechanisms: Australis uses various harvesting techniques, among which the live harvesting system In the case of Salar that is sold fresh in the United States, part of the sales using a wellboat or a tank-ship stands out, which allows live fish to be transported corresponds to contracts from 2 months to 1 year and the rest is set on a weekly from the farming centers to the processing plants. This system allows the fish to be or monthly basis. Shipments to Brazil are also agreed on a monthly basis. For other sucked from the cages and deposited in the wellboat storage tanks. Then, in the same relevant markets such as Latin America and China, prices are set weekly. boats, the fish are transported in optimal conditions of density and oxygenation, which ensures the best conditions of freshness and quality for their arrival at the In frozen products, mainly Trout and Coho destined for Japan, business closing take processing plants. place between 1 and 3 months prior to dispatch. This policy optimizes the price and reduces fluctuations in the spot market.
Sales by species, for the last two years
Sale (tons. WFE) 2018 2019 Variation 2018/2019
Atlantic Salmon 51,821 59,080 14% Rainbow Trout 7,554 11,432 51% Coho Salmon 468 268 -57% Total 59,843 70,780 18% 62 AUSTRALIS SEAFOODS THE BUSINESS 63
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Market diversification: INVESTMENT AND FINANCING POLICY In the search for alternative markets that cushion the eventual negative impact of Australis's exports during 2019 international crises and/or market slowdowns, Australis Seafoods has opened up to had the following markets as The company, according to the decisions made by the Board of the challenge of diversifying its markets and exports. their destination: Directors together with the Administration, and approved by 31.7% USA Making use of the wide network of commercial agreements signed by our country; the shareholders, may invest in all kinds of projects related to its 21.1% Europe the Company has implemented a dynamic and leading-edge export model, enhancing corporate purpose, that is, aimed at improving its production capacity, the competitive advantages of its products, exploring new niches and destinations 17.9% Latin America and diversifying its client portfolio. All of the above has allowed not only to expand its 10.4% Chile innovation in processes, marketing of their products and their quality. export coverage but also its presence in international markets. 9.4% Asia without Japan 7.5 Japan There is no maximum investment level, each decision will be evaluated in accordance Proof of the above is that during 2019 no client represented more than 10% of Salar 2% Others with the provisions of the annual budget and the economic conditions of the sales. While for Trout and Coho, a higher concentration is observed with 3 clients, in moment, which will determine the company's possibilities of obtaining the necessary both cases, which exceeded 10% of sales for the same species. financing.
Financing may come from both internal and external sources, without there being any limitation for any particular method, however, we will always seek to maintain a capital structure in accordance with a reasonable level of debt. In recent years, the company Customer development: has favored financing its operations through leasing and bank loans. One of the pillars of ASF's business strategy is customer orientation and focus. Attraction, loyalty and growth are fundamental axes that favor reliable, sustainable For cash surpluses, there is an investment policy in low-risk instruments, mainly and long-term relationships with its entire portfolio of clients. mutual funds and time deposits. Another alternative to make these surpluses profitable has been the advance payment to suppliers, which implies a discount in the An example of Australis's commercial policy is the “New World Currents”, a total amount of the invoice to be paid. commercial consortium formed in 2013 together with other companies in the sector and to which we belonged until the end of November 2019, the entity through which the products were directly marketed in the Chinese market. Starting in December 2019, the Joyvio Group subsidiary, Joyvio Foods, will oversee selling Australis Seafoods products in China.
In the United States, meanwhile, Australis's subsidiary called Trapananda Seafarms, LLC was installed in early 2016. The physical presence has allowed a considerable increase in shipments to this country, thanks to the closer relationship that has been generated with relevant wholesale companies. 64 AUSTRALIS SEAFOODS THE BUSINESS 65
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RISK FACTORS THE SALMON BUSINESS INHERENTLY CARRIES A SERIES OF RISK FACTORS THAT AFFECT THE DEVELOPMENT OF THE INDUSTRY. AMONG THESE FACTORS, THE FOLLOWING CAN BE MENTIONED:
MARKET RISK EXCHANGE RATE RISK OPERATIONAL RISKS INTEREST RATE RISK FEED COST
Salmon products are located The company's sales are made in Because they are biological About 80% of the debt is subject to The feed corresponds to the within the commodity category dollar currency, and therefore, assets, salmon production can be variations in the dollar libor rate, so most relevant direct cost in the and, therefore, are subject to there is an implicit risk in the potentially affected by a series of changes in said rate directly affect production of salmon and trout, price variations presented by appreciation of this currency with risks of this type. In this regard, the the company's results. All the rest both in the freshwater and growout international markets. Given the respect to the Chilean peso. In most relevant are: of the debt is also denominated stages. The variations originate above, sales prices are affected by this way, both the appreciations in United States dollars, but with from exogenous variables, such as seasonality that can lead to cyclical and the depreciations of the local Diseases: Although the diseases interest agreed at a fixed rate, the cost of fishmeal, which in turn changes in the prices of different currency directly affect the results are controlled through vaccines, so there is no exposure to rate depends on the costs associated products over time. of the company since an important antibiotics, good management variations. Currently, the company with extractive fishing. part of the expenses are in national practices and the production does not have mechanisms to set currency. of high-quality smolts, it is not the interest rate for floating rate possible to rule out the appearance loans. of new diseases or pests that affect production.
Predators: The presence of natural salmon predators, such as sea lions, can mean a loss of biomass and even destruction of cage nets. In this regard, the industry has implemented a series of preventive measures that help mitigate the adverse effects caused by this type of predator.
Nature risk: The growth of salmon depends, among other things, on climatic and oceanographic conditions. Changes in the luminosity of the environment or in the temperature of the water can have negative impacts on its growth. 66 AUSTRALIS SEAFOODS THE BUSINESS 67
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3 FACILITIES OWNED HATCHERIES In order to achieve the necessary conditions to develop a product that meets the highest standards, Australis has made significant investments considering each stage of the production process. Starting from farming in freshwater, there are three owned hatcheries 91 currently operating plus three leases, distributed in the regions of Los AQUACULTURE Lagos, Los Rios, Araucanía and Biobío. This geographical proximity CONCESSIONS facilitates their control and operation. In case of needing a greater capacity, third-party fish farms are used.
For the growout stage, the company has 91 of its own aquaculture concessions, distributed in the regions of Los Lagos (3), Aysén (61) and Magallanes (27). The latter 30 has seen this quantity increase particularly, as a result of the strategic plan that is PONTOONS designed to carry out the activity under the best sanitary conditions, oxygenation of the waters and density of concessions offered by the area. In addition to one more lease concession in the Aysén region. In total, the company's property concessions total around 531 hectares.
2 For the concessions currently operating, Australis has a total of 30 pontoons. All SECONDARY equipped with offices and bedrooms, with a load capacity ranging from 160 to 600 PROCESSING PLANTS tons of food and integrated feeding systems. During 2019, only one new pontoon was added and by 2020 eight more are expected, thus contributing to the optimal development of activities in the most remote areas where the company operates.
In the processing stage, Australis has two plants, since 2013 with the Fitz Roy secondary process plant, located in the municipality of Calbuco. The facilities comprise 7,000 square meters built, distributed over 3.6 hectares of land, where a cold room with a capacity for 1,100 tons of finished product stands out. Its location is strategic since it is only 55 kilometers from Puerto Montt and 250 kilometers from Quellón, where the Surproceso plant is in charge of providing us with the primary process of all the company's production.
In 2019 Australis acquired the Torres del Paine processing plant, which has 7,500 square meters built and is located 8 kilometers from the city of Punta Arenas, with a land of 3 hectares next to Route 9. Its purchase is in line with the company's production strategy for the XII region.
The commercialization of the products is carried out mainly from the offices of Puerto Varas and Miami, the latter through Trapananda Seafarms, a subsidiary of Australis in the United States. Currently the company also has sales points for the general public located in Puerto Natales, Puerto Varas and Santiago. 68 AUSTRALIS SEAFOODS THE BUSINESS 69
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INSURANCE term of 25 years; also, new expiry clauses in consideration of environmental factors were incorporated, accentuating in this regard the role of the holders in the maintenance and renewal of aquaculture concessions. In order to maintain an active management of the potential risks inherent in the business, the company has taken out insurance to have coverage against events of a different nature. In the same sense, the suspension of entry of new applications stands out, decreed in 2012, The policies that the company currently maintains grant the following coverage: damage in order to start a process of relocation, merger and/or division of aquaculture concessions, to facilities and machinery, as a result of natural-origin accidents and fires; Damage to which aims to reorganize the geographical distribution of them, in order to improve their third parties originating from the consumption of Australis products, damage and loss of environmental, sanitary and productive conditions. In this context, on April 7, 2015, Law both freshly harvested fish and finished product during transport (by sea, air or land) and N°20,825 was published, which extended the closing period to grant new aquaculture also while stored in refrigerators (inventory). As for biological assets, all biomass in the concessions, extending it until April 8, 2020. Freshwater stage is insured and, since September 2018, all biomass in the sea belonging to farming centers located in the Aysén and Magallanes regions. The aquaculture concession, defined today in article 2 number 12 of the Fishing Law as “The administrative act through which the Ministry of National Defense grants a person the Additionally, Australis has credit insurance for several of its clients, both national and rights of use and enjoyment, for the term of 25 renewable years on certain national assets, foreign, in the event of an eventual non-payment of its obligations. so that it carries out aquaculture activities therein”, constitutes an administrative act with a favorable content that gives an individual the exclusive exploitation of a national asset of It is the company's policy to permanently review the policies and the insured assets in order public use for the development of aquaculture activities for a renewable period of 25 years. to have coverage against the greatest number of risks, as far as possible. Consequently, regarding the validity of aquaculture concessions, it is possible to identify 3 situations, namely: (i) Aquaculture concessions granted before 2010, which are not within expiry clauses and have neither been relocated nor subject to a CORFO credit during the 2 years following the publication of Law 24,434, are indefinite ; (ii) Aquaculture concessions granted before 2010, which are not within expiry clauses and have been LICENSES AND CONCESSIONS relocated, or subject to a CORFO credit, within a period of 2 years from 2010, can be renewed for 25 years; and (iii) aquaculture concessions granted after April 8, 2010, which are not within expiry clauses, can be renewed for 25 years, without exception. All of the The main license or authorization that supports aquaculture activity is the aquaculture above, without prejudice to the subjection of all to the grounds for expiration established in concession. In the origins of the industry, they were regulated in a supplementary way by the Law. the Regulation of Maritime Concessions and some other special laws, until, on December 23, 1989, the General Law N°18,892 on fishing and aquaculture was published which, among other issues, systematically addressed the regulation of Aquaculture Concessions. Since then, the Fishing Law has been amended on multiple occasions, addressing aquaculture matters in three of them. In 2006, through Law N°20,091; in 2010, through Law N°20,434 and in 2012 through Law N°20,597. Although various issues have been addressed, it is possible to identify three main axes.
First, improvement in sanitary matters through the establishment of concession groups, determination of sanitary breaks, regulation of crop densities, preparation of environmental reports, among others.
Second, the strengthening of the institutions linked to aquaculture, through the strengthening of the supervisory and sanctioning role of the National Service of Fishing and Aquaculture, the creation of the National Commission of Aquaculture and the strengthening of the Undersecretariat of Fisheries and Aquaculture, mainly.
Thirdly, it is worth mentioning those reforms that were aimed at improving the legal regime that regulates aquaculture concessions. In this regard, as of 2012, it was established that the validity of the new aquaculture concessions that are granted would have a renewable 70 AUSTRALIS SEAFOODS THE BUSINESS 71
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CERTIFICATIONS LEGAL FRAMEWORK CERTIFICATION STATUS 2018 (FRESHWATER - SEAWATER - PROCESSING PLANT)
The Chilean salmon farming industry is regulated by a normative set within which we can distinguish two groups. The first includes aquaculture regulations as such as the General Fishing and Aquaculture Law N°18,892, the consolidated, coordinated and systematized text which is now contained in Supreme Decree N°430 of September 28, 1991, of the SERNAPESCA Ministry of Economy, and the regulations of regulatory rank that said Law originates, being of special importance Supreme Decree N°290, of May 28, 1993, of the Ministry of Economy, which contains the Regulation of aquaculture concessions; Supreme Decree N°319 of August 24, 2001, of the Ministry of Economy, which contains the 01 Process Plant 16 Sea Centers 10 Certified Sea 01 Process Plant 01 Process 01 Process 01 Process 01 Process Regulation of measures for the protection, control and eradication of high-risk diseases for Certificate (CoC) Certificates Centers (only in the Certificate Plant Plant Plant Plant Magallanes region). Certificate Certificate Certificate Certificate hydrobiological species; and Supreme Decree N°320 of August 24, 2001, of the Ministry 01 Process Plant of Economy, which contains the Environmental Regulation for aquaculture. Certificate (CoC) 01 Process Plant Certificate (CoC) The second normative group corresponds to a series of sectoral legal precepts, which 05 Freshwater Centers regulate assets relevant to aquaculture, such as water, and other norms of general Certificates application to productive activities, among which environmental, labor and sanitary (cluster 4 regulations are particularly important. Hatcheries IX and VIII Region) As a consequence of this diversity of regulations, aquaculture activity is subject to the supervision and / or monitoring of a multiplicity of public bodies. Among them, in their respective areas of competence, the Undersecretariat of Fishing and Aquaculture, the National Fishing and Aquaculture Service, the Undersecretariat of the Armed Forces, the Environmental Superintendence, the Maritime Authority and the Labor Directorate have http://www.australis-seafoods.com/inversionistas/archivo-financiero/etapa-agua-dulce/ special preponderance. http://www.australis-seafoods.com/inversionistas/archivo-financiero/etapa-engorda/ http://www.australis-seafoods.com/inversionistas/archivo-financiero/planta-de-proceso/ Regarding regulatory changes relevant to the sector, during 2019 the amendment to the Regulation of measures for the protection, control and eradication of high-risk diseases for hydrobiological species, N°319, of August 24, 2001, of the Ministry of Economy stands out which incorporates new conditions for broodstock centers at sea, regulates the exceptions of loss and again modifies the DS 74 of the Ministry of Economy dated August 23, 2016, which incorporated the percentage of reduction of seeding.
On the other hand, a series of resolutions of the National Fishing and Aquaculture Service are relevant, which for the first time regulate, in detail, the contingencies of massive mortalities in salmon farming centers, these being the exempt resolutions of the National Fishing and Aquaculture Service number 8561 and 8927 dated October 14 and 25, 2016 respectively. 72 AUSTRALIS SEAFOODS THE BUSINESS 73
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DIVIDEND POLICY Determination of the liquid profit, for the period ended on December 31, 2019:
Pursuant to the provisions of the Public Limited Companies Act, the Company is required 12/31/2019 ThUS $ Audited to distribute a minimum dividend equivalent to 30% of net profits, unless the unanimity of the shareholders agrees on an amount less than the indicated percentage. Profit attributable to majority interest 65,825
Variation in the fair value of biological assets (42.574) Under IFRS, the recognition of the obligation in favor of shareholders must be anticipated on the closing date of the annual financial statements with the consequent decrease in Deferred taxes associated with the fair value of biological assets 11,495 equity. Liquid profit 34,756 In accordance with what was reported to the Superintendency of Securities and Insurance, Accumulated losses - related to circular N°1945, for the purposes of determining the distributable liquid profit of the Head Company to be considered for the calculation of dividends in relation to the year Distributable liquid profit 34,756 2016, the following will be excluded from the results of the period: Dividend distribution at 30% 10,427 i) The unrealized results, linked to the recording at fair value of the biological assets regulated by the accounting standard "IAS 41", reintegrating them to the liquid profit at the time of their realization. For these purposes, the portion of fair value increases corresponding to assets sold or disposed of by some other means shall be understood to have been realized.
ii) The effects of deferred taxes associated with the concepts indicated in i) will follow the Dividend distribution corresponding to shareholders: same fate of the item that originates them.
12/31/2019 ThUS $ Audited
DISTRIBUTABLE PROFIT Profit attributable to majority interest 10,416
Variation in the fair value of biological assets 11 The dividend policy for the periods consists of distributing as a dividend at least 30% of the net profit for the period that will end on December 31, 2019, through the distribution of a Total dividends 10,427 final dividend, to be agreed by the Ordinary Shareholders Board, payable on the date that said board designates.
By virtue of the provisions of circular N°1945 of the CMF, dated March 29, 2009, it was agreed to establish as a general policy that the net profit for the purposes of paying the mandatory minimum dividend of 30%, established by article 79 of Law 18,046, will be determined on the basis of the net income of those relevant variations in the fair value of the assets and liabilities that have not been realized, which must be reintegrated to the calculation of the net profit of the period in which such variations are made .
The additional dividends will be determined based on the aforementioned criteria, according to the resolution adopted by the Shareholders Board.
As of December 31, 2019, the Company presented a definitive dividend provision to be distributed for ThUS $ 10,427 equivalent to 30% of the distributable liquid profit. 74 AUSTRALIS SEAFOODS THE BUSINESS 75
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RISK CLASSIFICATIONS STOCK TITLES Stock name: AUSTRALIS
As of December 31, 2019, the company maintains a risk classification, prepared by Quarterly summary of Australis share transactions for the last three years. Humphreys Risk Classifier. The classification of the shares has been maintained since June, when the classification was revalued, as "First Class Level 3". Additionally, the solvency Volume Amount ($) Closing Price ($) Higher Price ($) Lower Price ($) Average Price ($) category assigned to the company is “BBB-” and the trend assigned is “Favorable”.
2017Q1 121,412,828 4,029,679,959 42.10 42.26 26.02 33.19 Australis has not issued debt to date to finance its operations. 2017Q2 75,556,830 3,529,764,180 43.20 53.50 41.23 46.71
2017Q3 43,303,614 1,786,490,069 40.66 44.59 38.80 41.26
2017Q4 35,181,637 1,534,396,953 51.01 51.97 36.50 43.61
2018Q1 31,826,260 1,741,334,348 49.00 62.24 48.05 54.71
2018Q2 51,367,876 2,800,868,328 47.00 58.99 47.00 54.53
2018Q3 72,082,697 3,944,285,916 58.84 60.00 47.50 54.72
2018Q4 110,944,936 8,077,364,707 81.00 81.00 56.10 72.81
2019Q1 54,148,122 4,476,530,530 85.9 86 78 81.6
2019Q2 90,046,460 7,984,949,727 92.18 93.2 82.5 88
2019Q3 5,259,665 502,180,210 96.74 97 90.5 92.9
2019Q4 2,216 214,376 96.74 96.74 96.74 96.74
Source: Santiago Stock Exchange
As of December 31, 2019, all of the directors and main executives of the company who held shares have disposed of them in relation to the “OPA” issued by Food Invesment SpA to acquire in total the shares of the company. 76 AUSTRALIS SEAFOODS THE BUSINESS 77
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INFORMATION ON SUBSIDIARIES AND ASSOCIATES
AUSTRALIS MAR S.A. PISCICULTURA RÍO MAULLÍN SPA
Business name Australis Mar S.A. Business name Piscicultura Río Maullín SpA
Legal Nature Limited Company Legal Nature Joint-Stock Company
Subscribed and paid capital ThUS $ 223,359 Subscribed and paid capital $1,064
Import, export, distribution, representation and commercialization of all kinds of Social object Breeding and marketing of hydrobiological species, especially salmonid species. Social object merchandise, goods and products of any kind.
Jianhua Chen Jianhua Chen Directors Ricardo Misraji Vaizer Directors Ricardo Misraji Vaizer Rubén Henríquez Núñez Rubén Henríquez Núñez
General Manager Ricardo Misraji Vaizer General Manager Ricardo Misraji Vaizer % of total holding of the parent 100 % % of total holding of the parent 99.95% Investment ratio in the asset it represents in the parent 0% Investment ratio in the asset it represents in the parent 69%
AUSTRALIS AGUA DULCE S.A. CONGELADOS Y CONSERVAS FITZ ROY S.A.
Business name Australis Agua Dulce S.A. Business name Congelados y Conservas Fitz Roy S.A.
Legal Nature Limited Company Legal Nature Limited Company
Subscribed and paid capital ThUS $ 10,152 Subscribed and paid capital ThUS $ 404
Production, distribution and marketing of salmon and other varieties of fish in The extraction of fishing or hunting of beings or organisms that have their Social object their different stages of the production cycle, genetically improved, for fresh or normal livelihood in the water, the conservation, elaboration, transformation, Social object salt water. distribution and trade of these beings or organisms and of the products derived or obtained from them and their slaughter.
Jianhua Chen Directors Ricardo Misraji Vaizer Jianhua Chen Rubén Henríquez Núñez Directors Ricardo Misraji Vaizer Rubén Henríquez Núñez General Manager Ricardo Misraji Vaizer General Manager Ricardo Misraji Vaizer % of total holding of the parent 99.99% % of total holding of the parent 99,0553% Investment ratio in the asset it represents in the parent 3% Investment ratio in the asset it represents in the parent 0% 78 AUSTRALIS SEAFOODS THE BUSINESS 79
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INFORMATION ON SUBSIDIARIES AND ASSOCIATES
PROCESADORA DE ALIMENTOS ASF SPA PROCESADORA DE ALIMENTOS AUSTRALIS SPA
Business name Procesadora de Alimentos ASF SpA Business name Procesadora de Alimentos Australis SpA
Legal Nature Joint-Stock Company Legal Nature Joint-Stock Company
Subscribed and paid capital $1,000,000 Subscribed and paid capital $1,018
Build, install, maintain, manage and market, in any form, processing plants for Build, install, maintain, manage and market, in any form, processing plants for fish, shellfish and food in general, being able to lease, buy and enter into any type fish, shellfish and food in general, being able to lease, buy and enter into any type Social object of contract that allows exploitation of the necessary plants for proper commer- Social object of contract that allows exploitation of the necessary plants for proper commer- cialization in the country or for the export of all kinds of food products, be they cialization in the country or for the export of all kinds of food products, be they processors, balers, cold stores, warehouses for storage and dehydration. processors, balers, cold stores, warehouses for storage and dehydration.
Jianhua Chen Jianhua Chen Directors Ricardo Misraji Vaizer Directors Ricardo Misraji Vaizer Rubén Henríquez Núñez Rubén Henríquez Núñez
General Manager Ricardo Misraji Vaizer General Manager Ricardo Misraji Vaizer
% of total holding of the parent Indirectly 100% % of total holding of the parent Indirectly 100%
Investment ratio in the asset it represents in the parent 0% Investment ratio in the asset it represents in the parent 0%
COMERCIALIZADORA AUSTRALIS SPA SALMONES ISLAS DEL SUR LIMITADA
Business name Comercializadora Australis SpA Business name Salmones Islas del Sur Limitada
Legal Nature Joint - Sock Company Legal Nature Limited liability company
Subscribed and paid capital $1.039 Subscribed and paid capital $1,000,000
Import, export, distribution, representation and commercialization of all kinds of The import, export, distribution, representation and commercialization of all Social object Social object merchandise, goods and products of any kind., especially all kinds of hydrobiolo- kinds of merchandise, goods and products of any kind. gical resources and salmonid species. Administrator Australis Mar S.A.
Jianhua Chen % of total holding of the parent Indirectly 100% Directors Ricardo Misraji Vaizer Investment ratio in the asset it represents in the parent 0% Rubén Henríquez Núñez
General Manager Ricardo Misraji Vaizer
% of total holding of the parent Directly 100%
Investment ratio in the asset it represents in the parent 0% 80 AUSTRALIS SEAFOODS THE BUSINESS 81
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INFORMATION ON SUBSIDIARIES AND ASSOCIATES
ACUÍCOLA CORDILLERA LIMITADA AUSTRALIS NAVARINO S.A.
Business name Acuícola Cordillera Limitada Business name Australis Navarino S.A.
Legal Nature Limited liability company Legal Nature Limited Company
Subscribed and paid capital $1,000,000 Subscribed and paid capital $1,000,000
The import, export, distribution, representation and commercialization of all The import, export, distribution, representation and commercialization of all Social object Social object kinds of merchandise, goods and products of any kind. kinds of merchandise, goods and products of any kind.
Administrator Australis Seafoods S.A. Jianhua Chen % of total holding of the parent Indirectly 100% Directors Ricardo Misraji Vaizer Rubén Henríquez Núñez Investment ratio in the asset it represents in the parent 0%
General Manager Ricardo Misraji Vaizer
% of total holding of the parent Indirectly 100%
Investment ratio in the asset it represents in the parent 0%
SALMONES ALPEN LIMITADA AUSTRALIS RETAIL LTDA
Business name Salmones Alpen Limitada Business name Australis Retail Ltda
Legal Nature Limited liability company Legal Nature Limited liability company
Subscribed and paid capital $1,000,000 Subscribed and paid capital $60,000,000
The import, export, distribution, representation and commercialization of all Social object Social object Retail sale of fish and shellfish kinds of merchandise, goods and products of any kind.
Administrator Australis Mar S.A. Administrator Australis Mar S.A.
% of total holding of the parent Indirectly 100% % of total holding of the parent Indirectly 100%
Investment ratio in the asset it represents in the parent 0% Investment ratio in the asset it represents in the parent 0% 82 AUSTRALIS SEAFOODS THE BUSINESS 83
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INFORMATION ON SUBSIDIARIES AND ASSOCIATES
TRAPANANDA SEAFARMS LLC PESQUERA TORRES DEL PAINE LTDA.
Business name Trapananda Seafarms LLC Business name Pesquera Torres del Paine Ltda.
Legal Nature Limited liability company Legal Nature Limited liability company.
Subscribed and paid capital USD 30,000 Subscribed and paid capital $ 10,927,150,822
La realización de todas aquellas actividades permitidas por la normativa y aquellas Fishing, extraction, farming, production, elaboration, transformation, commer- Social object para las cuales pueden ser formadas este tipo de sociedades según la normativa Social object cialization, import and export of seafood; and of all hydrobiological resources in estadounidense. general
Jianhua Chen Administrator Australis Mar S.A. Directors Ricardo Misraji Vaizer % of total holding of the parent Indirectly 100% Derek Kohn Bruggemann Investment ratio in the asset it represents in the parent 2% General Manager Ricardo Cano
% of total holding of the parent Indirectly 100%
Investment ratio in the asset it represents in the parent 0%
PROCESADORA DUMESTRE LTDA. PROCESADORA NATALES LIMITADA.
Business name Procesadora Dumestre Ltda. Business name Procesadora Natales Ltda.
Legal Nature Limited liability company. Legal Nature Limited liability company.
Subscribed and paid capital $4,549,235,779 Subscribed and paid capital $10,000,000
Build, install, maintain, manage and market, in any form, processing plants for Build, install, maintain, manage and market, in any form, processing plants for fish, shellfish and food in general, being able to lease, buy and enter into any type fish, shellfish and food in general, being able to lease, buy and enter into any type Social object of contract that allows exploitation of the necessary plants for proper commer- Social object of contract that allows exploitation of the necessary plants for proper commer- cialization in the country or for the export of all kinds of food products, be they cialization in the country or for the export of all kinds of food products, be they processors, balers, cold stores, warehouses for storage and dehydration. processors, balers, cold stores, warehouses for storage and dehydration.
Administrator Australis Mar S.A. Administrator Congelados y Conservas Fitz Roy S.A.
% of total holding of the parent Indirectly 100% % of total holding of the parent Indirectly 100%
Investment ratio in the asset it represents in the parent 1% Investment ratio in the asset it represents in the parent 0% 84 AUSTRALIS SEAFOOD 85
Memoria Anual 2016 86 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 87
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CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2019 88 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 89
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CONTENTS
Independent Auditors' Report Consolidated statements of financial position Consolidated statements of net income Consolidated statements of comprehensive income Consolidated statements of changes in equity Consolidated statements of cash flows Notes to the consolidated financial statements
US$ - United States dollars ThUS$ - Thousands of United States dollars Ch$ - Chilean pesos MCh$ - Millions of Chilean pesos 90 91
Puerto Montt, 7 de marzo de 2019 INFORME DEL AUDITOR INDEPENDIENTE Australis Seafoods S.A. 2 Puerto Montt, 7 de marzo de 2019
Señores Accionistas y Directores Australis Seafoods S.A. Consideramos que la evidencia de auditoría que hemos obtenido es suficiente y apropiada para proporcionarnos una base para nuestra opinión.
Opinión Hemos efectuado una auditoría a los estados financieros consolidados adjuntos de Australis Seafoods S.A. y subsidiarias, que comprenden los estados consolidados de situación financiera al 31 de En nuestra opinión, los mencionados estados financieros consolidados presentan razonablemente, en diciembre de 2018 y 2017 y los correspondientes estados consolidados de resultados, de resultados todos sus aspectos significativos, la situación financiera de Australis Seafoods S.A. y subsidiarias al 31 integrales, de cambios en el patrimonio y de flujos de efectivo por los años terminados en esas fechas y de diciembre de 2018 y 2017, los resultados de sus operaciones y los flujos de efectivo por los años las correspondientes notas a los estados financieros consolidados. terminados en esas fechas, de acuerdo con las Normas Internacionales de Información Financiera (NIIF). Responsabilidad de la Administración por los estados financieros consolidados
La Administración es responsable por la preparación y presentación razonable de estos estados financieros consolidados de acuerdo con las Normas Internacionales de Información Financiera (NIIF). Esta responsabilidad incluye el diseño, implementación y mantención de un control interno pertinente para la preparación y presentación razonable de estados financieros consolidados que estén exentos de representaciones incorrectas significativas, ya sea debido a fraude o error.
Responsabilidad del auditor Guido Licci RUT: 9.473.234-4 Nuestra responsabilidad consiste en expresar una opinión sobre estos estados financieros consolidados a base de nuestras auditorías. Efectuamos nuestras auditorías de acuerdo con normas de auditoría generalmente aceptadas en Chile. Tales normas requieren que planifiquemos y realicemos nuestro trabajo con el objeto de lograr un razonable grado de seguridad de que los estados financieros consolidados están exentos de representaciones incorrectas significativas.
Una auditoría comprende efectuar procedimientos para obtener evidencia de auditoría sobre los montos y revelaciones en los estados financieros consolidados. Los procedimientos seleccionados dependen del juicio del auditor, incluyendo la evaluación de los riesgos de representaciones incorrectas significativas de los estados financieros consolidados ya sea debido a fraude o error. Al efectuar estas evaluaciones de los riesgos, el auditor considera el control interno pertinente para la preparación y presentación razonable de los estados financieros consolidados de la entidad con el objeto de diseñar procedimientos de auditoría que sean apropiados en las circunstancias, pero sin el propósito de expresar una opinión sobre la efectividad del control interno de la entidad.
En consecuencia, no expresamos tal tipo de opinión. Una auditoría incluye, también, evaluar lo apropiadas que son las políticas de contabilidad utilizadas y la razonabilidad de las estimaciones contables significativas efectuadas por la Administración, así como una evaluación de la presentación general de los estados financieros consolidados.
DC1 - Información de uso interno 92 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 93
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AUSTRALIS SEAFOODS S.A. AND SUBSIDIARIES Consolidated statements of financial position AL 31 DE DICIEMBRE DE 2019, 31 DE DICIEMBRE DE 2018 Y 1 DE ENERO 2018
NOTE 12/31/2019 12/31/2018 1/1/2018 NOTE 12/31/2019 12/31/2018 01/01/2018 THUS$ THUS$ THUS$ THUS$ THUS$ THUS$ AUDITED AUDITED AUDITED AUDITED AUDITED AUDITED
Liabilities and equity Assets Liabilities Current assets Current liabilities Cash and cash equivalents 6 11,258 17,106 17,111 Other financial liabilities, current 19 5,583 28,766 4,036 Other non-financial assets, current 8 6,019 4,373 3,576 Trade and other payables, current 20 179,063 101,902 80,298 Trade and other receivables, current 9 30,095 39,274 22,785 Employee benefit provisions, current 21 6,248 5,566 4,812 Accounts receivable from related entities, current 10 3,089 - - Total current liabilities 190,894 136,234 89,146 Inventories, current 11 46,976 44,842 45,474
Biological assets, current 12 294,368 189,266 128,190 Non-current liabilities Tax assets, current 13 9,241 6,839 6,409 Other financial liabilities, non-current 19 154,273 94,815 102,433
Total current assets 401.046 301,700 223,545 Accounts payable to related entities, non-current 10 6 - -
Deferred tax liabilities, non-current 18 65,189 45,439 35,441 Total non-current liabilities 219,468 140,254 137,874 Non-current assets
Other non-financial assets, non-current 14 38,870 28,272 24,521 Total liabilities 410,362 276,488 227,020 Investments accounted for using the equity method - 6 49 35
Intangible assets other than goodwill 15 49,998 50,558 40,624 Equity Goodwill 16 2,540 - - Share capital 22 305,383 305,383 305,383 Property, plant and equipment 17 201,098 136,035 105,547 Retained earnings 23 70,433 15,035 (45,676) Biological assets, non-current 12 72,351 56,096 55,390 Other reserves (2,020) (2,020) (2,020) Deferred tax assets 18 18,249 22,176 35,045 Equity attributable to owners of the parent company 373,796 318,398 257,687 Total non-current assets 383,112 293,186 261,162 Non-controlling interests - - - Total equity 373,796 318,398 257,687 Total assets 784,158 594.886 484,707
Total equity and liabilities 784,158 594,886 484,707
The accompanying notes 1 to 34 are an integral part of these consolidated financial statements. The accompanying notes 1 to 34 are an integral part of these consolidated financial statements. 94 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 95
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AUSTRALIS SEAFOODS S.A. AND SUBSIDIARIES AUSTRALIS SEAFOODS S.A. AND SUBSIDIARIES Consolidated statement of income Consolidated statements of comprehensive income FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 POR LOS EJERCICIOS TERMINADOS AL 31 DE DICIEMBRE DE 2019 Y 2018
NOTE 12/31/2019 12/31/2018 12/31/2019 12/31/2018 THUS$ THUS$ THUS$ THUS$ AUDITED AUDITED AUDITED AUDITED
Net income for the year Statement of Comprehensive Income Operating revenue 24 407,286 360,878 Net income for the year 65.825 60.711 Cost of sales 11 (324,305) (270,312)
Gross margin before fair value adjustments 82,981 90,566 Components of other comprehensive income, before tax Exchange differences on translation (Charge) credit to the income statement for the fair value of biological assets harvested and sold (*) 11 (72,416) (38,337) (Charge) credit to the income statement for the fair value of growth in biological assets for the year Gain (loss) from exchange differences on translation, before tax - - 11 110,355 58,071 (**) Other comprehensive income, before tax, from exchange differences on translation Gross margin 120,920 110,300 Gains from cash flow hedges - -
Other income, by function 25 968 3,662 Other components of other comprehensive income, before tax - - Distribution costs 26 (11,762) (10,266) Other comprehensive income - - Administrative expenses 27 (11,454) (11,872) Other expenses, by function 25 (3,257) (3,271) Total comprehensive income 65,825 60,711 Financial income 102 167 Financial costs 28 (7,325) (6,341) Comprehensive income attributable to Share of net income (losses) of equity method associates and joint ventures (35) 45 Comprehensive income attributable to owners of the parent company 65,825 60,711 Exchange differences 29 1,955 1,330 Comprehensive income (loss) attributable to non-controlling interests - - Net income before tax 90,112 83,754 Total comprehensive income 65,825 60,711 Income tax (expense) 17 (24,287) (23,043) Net income from continuing operations 65,825 60,711
Net income (loss) from discontinued operations - - Net income for the year 65,825 60,711
Net income attributable to Net income attributable to owners of the parent company 65,825 60,711 Net income attributable to non-controlling interests - - Net income for the year 65,825 60,711
Earnings per share
Basic and diluted earnings per share Basic and diluted earnings per share from continuing operations 0.0096 0.0088 Basic and diluted earnings per share from discontinued operations - - Basic earnings per share 0.0096 0.0088 The accompanying notes 1 to 34 are an integral part of these consolidated financial statements. (*) Any increase or decrease in the value of inventories caused by fair value valuations of the biomass harvested and sold as finished products. Any negative adjustment to net realizable value for finished product inventories is added to this amount. (See note 11). (**) Any positive or negative adjustments for fair value valuations of the biomass recognized during the year, plus any biomass impairment for the year. (See note 12).
The accompanying notes 1 to 34 are an integral part of these consolidated financial statements. 96 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 97
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AUSTRALIS SEAFOODS S.A. AND SUBSIDIARIES AUSTRALIS SEAFOODS S.A. AND SUBSIDIARIES Consolidated statements of changes in equity Consolidated statements of cash flows, direct method FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
Equity Equity attributable attributable Cash flow Total Retained to owners of to non- 12/31/2019 12/31/2018 Share Share hedge Other other earnings the parent controlling THUS$ THUS$ capital premium reserves reserves reserves (losses) company interests Total equity AUDITED AUDITED ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Cash flows from (used in) operating activities Opening balance as of 01/01/2019 301,565 3,818 - (2,020) (2,020) 15,035 318,398 - 318,398 Receipts Opening balance restated 301,565 3,818 - (2,020) (2,020) 15,035 318,398 - 318,398 Receipts from sales of goods and services 446,035 374,568 Other receipts from operating activities 76,805 67,309 Changes in equity Payments Comprehensive income Payments to suppliers for goods and services (426,645) (348,775) Dividends - - - - - (10,427) (10,427) - (10,427) Payments to and on behalf of employees (38,803) (32,338) Net income for the year - - - - - 65,825 65,825 - 65,825 Other payments for operating activities (8,318) (7,875) Total comprehensive income - - - - - 55,398 55,398 - 55,398 Net cash flows from operating activities 49,074 52,889 Capital increase ------Cash flows from (used in) investing activities Increases (decreases) due to transfers and ------other changes Cash flows used in obtaining control of subsidiaries (26,500) -
Total changes in equity - - - - - 55,398 55,398 - 55,398 Purchases of property, plant and equipment (65,849) (40,441) Purchases of intangible assets - (4,318) Closing balance as of 12/31/2019 301,565 3,818 - (2,020) (2,020) 70,433 373,796 - 373,796 Proceeds from sales of intangible assets 1,700 -
Opening balance as of 01/01/2018 301,565 3,818 - (2,020) (2,020) (65,546) 237,817 - 237,817 Net cash flows used in investing activities (90,649) (44,759) Cash flows from (used in) financing activities Increase (decrease) for change of accoun------19,870 19,870 19,870 ting policies Proceeds from borrowings classified as financing activities 59,797 -
Opening balance restated 301,565 3,818 - (2,020) (2,020) (45,676) 257,687 - 257,687 Loan repayments (10,356) (283) Repayment of finance lease liabilities (9,660) (3,288)
Changes in equity Interest paid, classified as financing activities (6,972) (5,213) Total comprehensive income Other cash outflows (332) - Net income for the year - - - - - 60,711 60,711 - 60,711 Net cash flows (used in) financing activities 32,477 (8,784) Other comprehensive income ------Total comprehensive income - - - - - 60,711 60,711 - 60,711 Net increase (decrease) in cash & cash equivalents before exchange rate effects (9,098) (654) Capital increase ------
Increases (decreases) due to transfers and Effect of changes in exchange rates on cash and cash equivalents 3,250 649 ------other changes Net change in cash and cash equivalents (5,848) (5) Total changes in equity - - - - - 60,711 60,711 - 60,711 Cash and cash equivalents at the beginning of the year 17,106 17,111 Closing balance as of 12/31/2018 301,565 3,818 - (2,020) (2,020) 15,035 318,398 - 318,398 Cash and cash equivalents at the end of the year 11,258 17,106
Accounting effects totaling ThUS$ 1,703 from applying Circular 856 issued by the FMC in 2014 are included in Other reserves.
The accompanying notes 1 to 34 are an integral part of these consolidated financial statements.
The accompanying notes 1 to 34 are an integral part of these consolidated financial statements. 98 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 99
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AUSTRALIS SEAFOODS S.A. AND SUBSIDIARIES Notes to the consolidated financial statements AS OF DECEMBER 31, 2019 AND 2018 A subsidiary of Australis Mar S.A., Trapananda Seafarms LLC was created on January 19, 2016 in the United States and whose main NOTE 1 - GENERAL INFORMATION purpose is marketing salmonid products. It operates a modern, efficient and environment-friendly business model.
Australis Seafoods S.A., Chilean ID number 76,003,557-2 (hereinafter “Australis Seafoods” or the “Company”) is a Corporation On November 18, 2018, Inversiones ASF Limitada, Asesorías e Inversiones Benjamín S.A., Inversiones Ruiseñor Dos Limitada, formed by a public deed dated October 31, 2007, granted in the Santiago Notary of Mr. Iván Torreala Acevedo, as per digest as Company shareholders informed the Chairman of the Board that they have signed a purchase commitment agreement with 11,568-07. A summary of that deed was registered with the Commercial Registry of the Santiago Real Estate Registrar on page Joyvio Group Co, Ltd. under which Joyvio could acquire up to 100% of the Company’s shares through a public take-over bid. The 48,775 number 34,583. agreement is subject to compliance with certain conditions that must be met by April 2019. The purchase commitment agreement specified the value of the bid for all the Company’s subscribed and paid shares as US$880,000,000, payable in U.S. dollars, or in The Company is domiciled at Decher 161, Puerto Varas, notwithstanding the agencies, offices or branches that are established in its equivalent in Chilean pesos at the official exchange rate on the date of payment, at the option of the take-over bid recipients. If Chile or abroad. The Company has an indefinite life. the conditions in the purchase commitment agreement are fulfilled, and either Joyvio or the shareholders fail to comply with their obligation to complete the transfer, the diligent party may charge the defaulting party US$ 20,000,000, as an advance assessment On May 19, 2011, the Company was registered on the Securities Register of the Financial Markets Commission under number of damages. 1074. On June 26, 2019, the company Food Investment SpA published a notice of commencement of a public offer for the acquisition The Company’s capital amounts to three hundred and five million three hundred and eighty-three thousand US dollars (ThUS$ of shares for up to 100% of the shares issued by Australis Seafoods SA, in accordance with the provisions of article 201 of the 305,383) divided into 6,825,687,194 shares (six billion, eight hundred and twenty-five million, six hundred and eighty-seven Securities Market Law (the “POS”), which was extended between June 27 and July 26, 2019, both dates inclusive. thousand, one hundred and ninety-four shares), as follows: During the validity of the takeover bid, Food Investment SpA received acceptances for 6,814,640,680 (six thousand eight hundred THUS$ NUMBER OF SHARES fourteen million six hundred forty thousand six hundred eighty) shares, equivalent to 99.838% (ninety-nine point eight hundred thirty-eight percent) of the ordinary shares , of a single series and without nominal value, fully subscribed and paid, which were Subscribed and paid capital 305,383 6,825,687,194 acquired by Food Investment SpA, materializing the change in control of the Company. Total capital 305,383 6,825,687,194 The business of Australis Seafoods S.A. is defined in its bylaws as:
a) Importing, exporting, distributing, representing and marketing of any kind of merchandise, goods and products. The Company is a parent comprising a group of five subsidiaries; Australis Agua Dulce S.A. (formerly Landcatch Chile S.A.), Australis Mar S.A., Piscicultura Río Maullín SpA, Comercializadora Australis SpA and Congelados y Conservas Fitz Roy S.A. This b) Purchasing, selling, exchanging, leasing and disposal of any kind of real estate and movable property, aquaculture concession, structure was defined late in 2010 in order to focus and promote the group’s business units, which are the freshwater business fishing and aquaculture permit, rights and other similar goods. through the subsidiary Australis Agua Dulce S.A. and the seawater business through the subsidiary Australis Mar S.A. This replaces the group’s initial structure where two subsidiaries handled the freshwater business, one subsidiary handled the seawater fattening c) Providing any kind of service, either for itself or on behalf of third parties, and general advisory services, including those related to business, and two additional subsidiaries. This structure made developing the group’s business inefficient. fishing and aquaculture, among others. On March 28, 2013, the Company acquired Mainstream Chile S.A. and other companies related to it, a salmon secondary d) Purchasing, selling, breeding, cultivating, importing, exporting, marketing and distributing any kind of hydrobiological resources, processing plant located in Calbuco, Los Lagos Region. The transaction took place though series of purchase agreements where particularly, salmonid species, and any business directly or indirectly related to fishing and aquaculture activities. the Company acquired directly and through its subsidiary Piscicultura Rio Maullin SpA, all the shares in Congelados y Conservas
Fitz Roy S.A., making Fitz Roy a subsidiary. Subsequently, Fitz Roy acquired various properties, water rights and movable assets e) Investing in every kind of real estate or movable property, either tangible or intangible, such as shares, bonds and debentures, that comprise the acquired processing plant. The Company expects that this transaction will improve its productive efficiency and commercial papers, savings plans, shares or rights in any kind of companies, either commercial or civil, communities or associations flexibility, quality and reliability, cost efficiency, and several other logistical and process control advantages. This will enable the and in any kind of marketable securities and, in general, performing all the procedures to fulfill those purposes, and Company to continue consolidating its growth and vertical integration.
f) Forming, creating or merging companies, associations or corporations of any nature to fulfill its business purposes. The acquisition price was eleven million seven hundred thousand US dollars (ThUS$ 11,700), US$ ten million was paid in cash on the date the agreements were signed, and the balance was paid as indicated in the respective agreements, over a term of less than At the reporting date, Australis Seafoods S.A. and its subsidiaries are involved in all of these activities. one year.
The consolidated financial statements of Australis Seafoods S.A. and its subsidiaries comprise the classified consolidated statements The Fitz Roy plant includes 4,800 m2 of buildings, it has its own wharf and is located on a 3.6ha plot on the Calbuco coast, in the of financial position, consolidated statements of net income by function, consolidated statements of comprehensive income, Reloncaví Sound. It is located around 56 km from Puerto Montt, which represents a strategic location both for receiving salmonids consolidated statements of cash flows, direct method, consolidated statements of changes in equity and the related notes that for processes and subsequently delivering them by land, which will reduce operating costs. contain the disclosures to these consolidated financial statements. The group became a member of New Word Current in 2014, whose purpose is to market the produce of the subsidiary Australis These consolidated financial statements show a true and fair view of the Company’s equity and financial situation as of December 31, Mar S.A. in China. 100 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 101
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2019 and 2018, and the results of its operations, changes in equity and cash flows for the years then ended. Amendments and improvements For comparison purposes, the classified consolidated statement of financial position and the related explanatory notes are Amendment to IFRS 9 “Financial instruments”. Issued in October 2017. This amendment allows more assets to be measured at compared with the financial position as of December 31, 2018. The consolidated statement of net income by function, amortized cost than in the previous version of IFRS 9, particularly certain financial assets prepaid with a negative compensation. consolidated statement of comprehensive income, consolidated statement of cash flows, direct method, and consolidated The qualifying assets included are certain loans and debt securities, which otherwise would have been measured at fair value through statement of changes in equity are compared with the year ended December 31, 2018. profit or loss (FVTPL). For them to qualify at amortized cost, the negative compensation must be a "fair compensation for the advance termination of contract". The consolidated financial statements Australis Seafoods S.A. and its subsidiaries were prepared on a going concern basis. Amendment to IAS 28 “Investment in associates and joint ventures.” Issued in October 2017. This amendment clarifies that The consolidated financial statements of Australis Seafoods S.A. for the year ended December 31, 2019 were approved by the companies that account for long-term interests in a joint venture or associate - where the equity method is not applied - must be Board of Directors on March 27, 2020. accounted for using IFRS 9. The IASB Board has published an example illustrating how companies apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associate or joint venture.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Amendment to IFRS 3 “Business combinations” Issued in December 2017. The amendment would clarify that obtaining control of a company that is a joint venture is a business combination that is achieved in stages. The acquirer must re-measure its previously The following section describes the main accounting policies used by the Company in preparing the consolidated financial held interest in the joint venture at fair value at the acquisition date. statements, which have been applied uniformly to all years presented in these consolidated financial statements. Amendment to IFRS 11 “Joint Arrangements” Issued in December 2017. The amendment clarified that the party obtaining joint 2.1 Basis of preparation control of a company which is a joint venture should not re-measure its previously held interest in the joint venture.
The consolidated financial statements for the year ended December 31, 2018, have been prepared in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board (IASB). Amendment to IAS 12 “Income tax” Issued in December 2017. The amendment clarified that the income tax consequences of dividends on financial instruments classified as equity should be recognized in accordance with where past transactions or events The preparation of these consolidated financial statements in accordance with IFRS requires the use of certain accounting that generated distributable income were recognized. estimates and assumptions. It also requires Management to exercise its judgment when implementing the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to Amendment to IAS 23 “Borrowing Costs” Issued in December 2017. The amendment clarified that, if a specific loan remains outs- the consolidated financial statements are disclosed in Note 4. tanding after the qualifying asset is ready for its intended use or sale, it becomes part of the general loans.
There are no significant uncertainties regarding events or conditions as of the reporting date that may cast doubt on the Company’s ability to continue functioning normally as a going concern. Amendment to IAS 19 “Employee Benefits” Issued in February 2018. The amendment requires entities to use updated assumptions to determine the current service cost and net interest for the rest of the period after a plan modification, reduction, or liquidation; There have been minor reclassifications to the consolidated financial statements for previous years, in order to facilitate a and to recognize in profit or loss as part of the past service cost, or a gain or loss in liquidation, any reduction in a surplus, even if comparison. that surplus was not previously recognized because it did not exceed the asset's maximum limit.
The adoption of the standards, amendments and interpretations described above does not have a significant impact on the financial 2.2 New accounting pronouncements statements of the Company.
Standards, interpretations and amendments that are mandatory for the first time for financial periods beginning on January 1, 2019. Standards, interpretations and amendments issued, whose adoption is not mandatory yet, for which no early adoption has been made. Standards and interpretations IFRS 16 “Leases” – Issued in January, 2016, it establishes the principle for the recognition, measurement, presentation and disclo- sure of leases. IFRS 16 replaces the current IAS 17 and introduces a single lease accounting model. It also requires a lessee to re- cognize assets and liabilities for all lease contracts with terms over 12 months, unless the value of the underlying assets is low. IFRS 16 is effective for annual periods that begin on or after January 1, 2019, early adoption is permitted for entities that apply IFRS 15 before the first-adoption date of IFRS 16.
IFRIC 23 “ Uncertainty over income tax treatments”. Issued in June 2017. This interpretation clarifies how the recognition and measurement requirements of IAS 12 apply when there is uncertainty about the tax treatment. 102 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 103
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2.2.2 Standards, interpretations and amendments issued, whose adoption is not mandatory yet, for which no early adoption has 2.3 Basis of consolidation been made. a) Subsidiaries Standards and interpretations Mandatory for years Subsidiaries are all the entities over which the Australis Seafoods S.A. has the power to direct its financial and operating policies. starting on Such power is generally associated with an ownership interest of more than half of the voting rights. When evaluating whether Australis Seafoods S.A. and its subsidiaries (hereinafter the “Group”) controls another entity, all its currently exercisable or convertible voting rights and their effects are considered. Subsidiaries are consolidated from the date on which control is IFRS 17 “Insurance Contracts”. Issued in May 2017, it replaces current IFRS 4. IFRS 17 shall 01/01/2021 change accounting mainly for all entities issuing insurance and investment contracts with transferred and are excluded from consolidation from the date that control ceases. discretionary participation characteristics. The standard is applied for annual periods starting on January 1, 2021. Early application is permitted provided that IFRS 15 "Revenue from contracts The purchase method is used to account for acquisitions of subsidiaries. Acquisition cost is the fair value of the company’s assets, with customers" and IFRS 9 "Financial instruments" are applied. equity instruments and liabilities at the date of exchange. Directly attributable acquisition costs are recorded in the year that they occur. Identifiable assets, liabilities and contingencies acquired in a business combination are initially valued at their fair value on the acquisition date, regardless of the extent of minority interests. The acquisition cost in excess of the fair value of the Company’s Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, 01/01/2020 share of the identifiable net assets is recognized as purchased goodwill. If the acquisition price is less than the fair value of the net Changes in Accounting Estimates and Errors” Issued in October 2018. It uses a consistent assets of the acquired subsidiary, the difference is recognized directly in the statement of net income. definition of materiality in all IFRSs and the Conceptual Framework for Financial Reporting; it clarifies the explanation of the definition of material; and it incorporates some of the guidance Intercompany transactions, balances and unrealized gains on transactions between related entities are eliminated. Unrealized losses in IAS 1 on non-significant information. are also eliminated, unless that transaction provides evidence that the transferred asset is impaired. The accounting policies at subsidiaries are amended as necessary, to ensure that Australis Seafoods S.A. policies have been consistently adopted. Amendments to IFRS 3 “Definition of a business” Issued in October 2018. It revises the 01/01/2020 definition of a business. According to feedback received by the IASB, application of the current The Company consolidates the following subsidiaries: guidance is commonly thought to be too complex, and it results in too many transactions quali- fying as business combinations.
Amendment to IFRS 9, IAS 39 and IFRS 7 "Reform to the reference interest rate " Issued in 01/01/2020 September 2019. These amendments provide certain simplifications in relation to the reform to reference interest rates. The simplifications relate to hedge accounting and have an effect on the IBOR reform which usually should not cause hedge accounting to end. However, any hedge ineffectiveness must continue to be recorded in income.
Amendment to IFRS 10, “Consolidated Financial Statements,” and IAS 28, “Investments Not specified in Associates and Joint Venture.” Issued in September 2014. The amendment addresses an inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction in- volves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.
The management of the Company believes that adoption of the standards, amendments and interpretations described above will not have a significant impact on the financial statements of the Company in the period of first-time adoption. 104 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 105
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The Company consolidates the following subsidiaries: new company, with effect from January 1, 2010. The new company’s equity and therefore the amount by which the share capital of Australis Seafoods S.A. decreased was ThUS$ 9,714, which was the investment in Australis S.A. jointly with its goodwill. As a result, As of December 31, 2019 Australis Seafoods S.A. ceased to be the owner of Australis S.A. As of December Subsequently, on July 2011, the Company acquired all the shares of Comercializadora Australis SpA, which had no activities as Chilean ID Functional Direct Indirect Total 31, 2018 of that date. Through this entity, the Company acquired 50% of True Salmon Pacific Holding Co. on December 9, 2011, which Company name Number Country currency % % % % owned all the shares of True Nature Seafoods Inc. and South Pacific Specialities LLC, through which it operated its fish and seafood marketing business in the United States and Canada. Australis Mar S.A. 76.003.885-7 Chile USD 99.95 0.05 100.00 100.00 Piscicultura Río Maullín SpA 76.082.694-4 Chile USD 100.00 - 100.00 100.00 On March 23, 2012, Australis Mar S.A., incorporated the following subsidiary companies: (i) Acuícola Cordillera Limitada, (ii) Salmones Alpen Limitada, (iii) Salmones Wellington Limitada and (iv) Salmones Islas del Sur Limitada, all of them operating an Australis Agua Dulce S.A. 76.090.483-K Chile USD 99.99 0.01 100.00 100.00 aquaculture business. These subsidiaries were incorporated in order to support the Company’s growth. Australis Navarino S.A. 76.532.356-8 Chile USD 99.90 0.10 100.00 100.00 On March 28, 2013, the Company purchased a secondary salmon processing plant located in Calbuco, Los Lagos Region. Several Comercializadora Australis SpA 76.126.907-0 Chile USD 100.00 - 100.00 100.00 purchase agreements were used to complete the purchase, as follows: (i) The Company acquired directly and through its subsidiary Procesadora de Alimentos Australis SpA 76.126.902-K Chile USD - 100.00 100.00 100.00 Piscicultura Rio Maullin SpA, all the shares of Congelados y Conservas Fitz Roy, making it a subsidiary, (ii) subsequently, “Fitz Roy” acquired various properties, water rights and movable assets that comprise the acquired processing plant. Salmones Islas del Sur Ltda. 76.787.110-4 Chile USD - 100.00 100.00 100.00 Acuícola Cordillera Ltda. 76.787.060-4 Chile USD - 100.00 100.00 100.00 The subsidiary Comercializadora Australis SpA agreed to sell its 50% shareholding in True Salmon Pacific Holding Co LLC (hereinafter, “TSP”) incorporated under the Laws of Florida, United States of America, to True Pacific Holding Company Inc. in a Salmones Alpen Ltda. 76.005.426-7 Chile USD - 100.00 100.00 100.00 contract signed on June 3, 2014. The sale and other agreements established in this contract were subject to compliance with the Procesadora de Alimentos ASF SpA. 76.230.946-7 Chile USD - 100.00 100.00 100.00 condition precedent that the US bank The Northern Trust Company, a creditor of TSP, authorized the sale, which took place on June 2, 2014, hereinafter the “closure date”. Therefore, the sale of these shares took place on that date. Congelados y Conservas Fitz Roy S.A. 96.949.830-8 Chile USD 99.99 0.01 100.00 100.00 Trapananda Seafarms LLC Foreign USA USD - 100.00 100.00 100.00 The shares in TSP had been acquired on 2011, when distribution contracts between Australis Mar S.A. and TSP were signed. Accordingly TSP became the exclusive distributor for Australis Mar S.A. products in US and Canadian markets. These contracts Australis Retail Ltda. 76.899.587-8 Chile USD - 100.00 100.00 100.00 were terminated by mutual consent on the closure date. Pesquera Torres del Paine Ltda. 96.524.510-3 Chile USD - 100,00 100,00 - Procesadora Dumestre Ltda. 77.104.786-6 Chile USD 99,99 0,01 100,00 - The sale of shares in TSP was a component of the Company’s business development, which aimed to focus on marketing the 3 species that it produces (Atlantic and Coho salmon and trout) and not diversify marketing resources across species that the Procesadora Natales Ltda. 77.104.776-9 Chile USD 99,99 0,01 100,00 - Company does not currently produce. At the end of 2010, Australis Seafoods S.A. (the parent company) restructured the group in order to simplify its operations, by separating the freshwater business from the seawater fattening business. This restructuring included selling shares within the group, On January 19, 2016, Trapananda Seafarms LLC was created as a subsidiary of Australis Mar S.A. It operates in the USA and its resulting in a simpler structure which concentrated the freshwater business in Australis Agua Dulce S.A. (formerly Landcatch Chile main business is marketing salmonid products. S.A.) and the seawater fattening business in Australis Mar S.A. On March 17, 2016, a Shareholders’ Meeting of Australis Agua Dulce S.A. agreed to dissolve its subsidiary Piscicultura Rio Salvaje As a result of this restructuring, the following transactions took place: On December 16, 2010, Australis S.A. sold a share S.A. In addition, on January 6, 2016, Australis Agua Dulce S.A. acquired all the shares of Inversiones Ovas del Pacifico Ltda., which of Australis Agua Dulce S.A. (formerly Landcatch Chile S.A.) to Piscicultura Río Calle Calle SpA. On December 20, 2010, was dissolved on February 2, 2016. an Extraordinary Shareholders Meeting agreed to increase the share capital of Piscicultura Río Calle Calle SpA by ThUS$ 10,723 through issuing shares. This increase was subscribed and paid in full by Australis Seafoods S.A. (the parent company) by On January 6, 2016, Piscicultura Rio Maullín SpA assigned its shares to Australis Mar S.A. As a result, it owned all of Salmones contributing all the shares it owned in Australis Agua Dulce S.A. (formerly Landcatch Chile S.A.) plus a sight promissory note. As Wellington Ltda, which was dissolved on February 3, 2016. a result, Piscicultura Río Calle Calle SpA became the owner of all the shares in Australis Agua Dulce S.A. Therefore, the latter was dissolved and the former becomes its legal successor. Additionally, in the same meeting, the private company "Piscicultura Río A public deed dated December 5 2016 extended the lives of Salmones Galway Ltda and Salmones Mitahues Ltda to December 15, Calle Calle SpA" became the privately held corporation "Australis Agua Dulce S.A" (formerly Landcatch Chile S.A.). 2016. Subsequently these two companies were legally dissolved on December 15, 2016.
On December 31, 2010, an Extraordinary Shareholders’ Meeting agreed to divide Australis Seafoods S.A. into two companies, by On May 29, 2017, an Extraordinary Shareholders' Meeting Australis Mar S.A. approved a capital increase, which was subscribed forming a new company with the name "Inversiones en Acuicultura S.A.", while the successor keeps the name and ID number. The and paid in full by the shareholder Piscicultura Río Maullín SpA. Payment was by contributing the shares owned by Piscicultura Río same meeting approved the new company’s equity, and the assets and liabilities of the divided company that were transferred to the Maullín SpA in Salmones Gama Limitada and Chile Seafood S.A., both subsidiaries of Australis Mar S.A. This resulted in Australis 106 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 107
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Mar S.A. becoming the sole shareholder of both Salmones Gama Limitada and Chile Seafood S.A., so these two companies were c) Exchange rates legally dissolved. The exchange rates to the US dollar of the main currencies used in the accounting procedures of Australis Seafoods S.A. and its subsidiaries as of December 31, 2019 and December 31, 2018, are as follows: An extraordinary shareholders' meeting of the subsidiary Australis Mar S.A. was held on December 28, 2017 and approved a capital increase of ThUS$ 77,651, which was subscribed and paid in full by Australis Seafood S.A. It offered to pay for these shares using funds owed by the Company, arising from a current account between them. This was unanimously approved by the shareholders, pursuant to the provisions of Article 15 of the Law on Corporations. As of December 31, 2019 As of December 31, 2018
Australis Retail Ltda. was created on June 13, 2018, whose purpose is to supply salmon products to the domestic retail market. Accumulated monthly Accumulated monthly Closing average Closing average
On July 10, 2019 Australis Seafoods S.A. acquired the indirect control of Pesquera Torres del Paine Limitada, and with it the Chilean peso 748,74 770,39 694,77 681,99 operation of its processing plant located in Punta Arenas, thus improving the processing capacity of salmonid species grown in area. This transaction was carried out for an amount of ThUS 26,500.
b) Transactions and non-controlling interests 2.6 Property, plant and equipment
Any non-controlling interests are shown as equity in the classified consolidated statement of financial position. The net income The Company’s property, plant and equipment is land, building, infrastructure, machinery, equipment and other fixed assets. The attributable to non-controlling interests is presented in the consolidated statement of income by function as a component of principal property, plant and equipment of Australis Seafoods S.A. and its subsidiaries are lands, freshwater fish farms, with their net income for the period. Transactions between non-controlling shareholders and shareholders of the companies where equity respective equipment and machinery, seawater fattening centers and the Fitz Roy processing plant, which has 4,800 m2 of ownership is shared are recorded within equity and are therefore shown in the statement of changes in equity. buildings, its own wharf and is located on a 3.6 ha plot on the Calbuco coast, in the Reloncaví Sound.
c) Joint Arrangements Property, plant and equipment are recorded initially and subsequently at historical cost less their corresponding depreciation and any accumulated impairment. Any shares in joint arrangements are included using the equity method as described in IFRS 11. As permitted by IFRS 1, the most important lands and buildings at the freshwater subsidiary were revalued on January 1, 2010, for the transition to IFRS. The revaluations were based on market value. These lands and buildings were subsequently valued according 2.4 Segment Reporting to IAS 16 using the historical cost method. Seawater fixed assets were accounted for both initially and subsequently at their respective historical cost, less their corresponding depreciation and any accumulated impairment. IFRS 8 requires entities to adopt "Management's approach" when disclosing information about the results of their operating segments. In general, this is the information that Management uses internally to evaluate segment performance and to allocate Subsequent costs (replaced components, improvements, expansion, etc.) are included in the asset’s initial value or are recognized resources to segments. as separate assets only when it is probable that future financial benefits associated with the fixed asset will be received by the Group and the cost of the fixed asset can be reliably measured. The value of the component replaced is expensed. Any remaining repairs Australis Seafoods S.A. does not disclose financial information segregated by segments, as its business is dedicated to producing and maintenance are charged to income in the period they arise. and marketing salmonids through its subsidiary Australis Mar S.A., and it therefore has only one segment. Costs arising from daily maintenance and routine repairs are recorded in net income for the period, as opposed to replaced important parts or assets and strategic spare parts, which are capitalized and depreciated over remaining useful life of the assets, 2.5 Foreign currency transactions based on these components.
a) Functional and presentation currency Depreciation is calculated using the straight-line method, and systematically distributed throughout the useful life of the fixed Items included in the consolidated financial statements of Australis Seafoods S.A. and its subsidiaries are valued by using the asset. This useful life is based on natural expected deterioration and technical or commercial obsolescence, due to changes or currency of its primary economic environment (functional currency). The functional currency of Australis Seafoods S.A. and its improvements in production and changes in market demand for the products produced by these assets. Land is not depreciated. subsidiaries is the US dollar, which is also the presentation currency of its consolidated financial statements.
b) Transactions and balances Transactions in foreign currency are converted to the functional currency using the exchange rate in force as of the date of the transaction. Gains and losses on foreign currencies resulting from settling these transactions, and the conversion of monetary assets and liabilities denominated in foreign currencies at closing rates, are recognized in the statement of net income. 108 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 109
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Estimated useful lives and residual values are as follows: Valuation model
Fresh Water Sea Water The evaluation is reviewed for each fish farm and is based on the fish biomass inventory at each reporting date. The detail includes Average Residual Value Average Residual Value the total number of breeding fish, the average weight and the cost of the fish biomass. Useful life Years ThUS$ Years ThUS$ Each farming center has its own estimate of fair value, brought to present value discounted according to its risk factor, the final Buildings 14 - 14 - value being the sum of each. Plant and equipment 5 - 4 -
IT equipment 4 - 3 - Assumptions used to calculate the fair value of growing fish
Fixtures and fittings 6 - 9 - The estimated fair value of the fish biomass will be always based on uncertain assumptions, even if the Company has sufficient experience when considering these factors. Estimates take into account the following factors: fish biomass volume (after applying the average mortality), average biomass weights, distribution of weights at harvest and estimates prices. The Company reviews and adjusts if necessary the useful lives of its assets as of each reporting date, so that remaining useful lives are in line with asset values. Volume of fish biomass When an asset's value is greater than its estimated recoverable amount, its value is reduced immediately to its recoverable amount by applying impairment testing. The fish biomass volume is an estimate based on the number of smolts transferred to seawater, their estimated growth at that moment, the mortality rate for the fish farms in the period, etc. Uncertainty regarding the volume of biomass is usually lower in Losses and gains on the sale of property, plant and equipment are calculated by comparing proceeds obtained to the book value absence of massive mortality events during a cycle, or the absence of diseases. (net of depreciation) and are included in the statement of income.
Accumulated Costs 2.7 Biological assets The accumulated costs per sea farming center at the date of the calculation of fair value are obtained from the company's Salmonid biological assets are the Coho and Atlantic salmon and trout species that have reached the fattening stage in seawater, accounting. they are valued at their fair value less estimated selling costs, according to the definitions in IAS 41.
Biological assets associated with the freshwater stage, covering eggs, fry and smolts, are valued at accumulated cost at the Remaining Costs reporting date. The estimation of remaining costs is based on the projection of direct and indirect expenses that will affect the biomass of each center until the moment of its final harvest. This estimate is refined in each calculation period, reducing uncertainty as the harvest Direct and indirect costs incurred in the productive process form part of the value of biological assets. Accumulated costs at each time approaches. reporting date are compared to the fair value of the biological asset.
Changes in the fair value of these biological assets are recorded in the statement of income for the period. Biological assets that are Price Projection expected to be harvested within 12 months are classified as current assets. The assumption of market prices is important for the evaluation. In the case of the subsidiary Australis Mar SA and for the years ended December 31, 2019 and 2018, sales projected by the company for each month were used based on information on future A summary of the valuation criteria is as follows: prices obtained from public sources, adjusted to historical behavior of prices observed in the main destination market of our fish, at which the costs of harvesting, processing, packaging, distribution and sale are discounted.
Stage Asset Valuation
Fresh water Eggs Direct and indirect cumulative cost Fresh water Fry and smolts Direct and indirect cumulative costs at their various stages Sea water Fish in the sea Fair value 110 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 111
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2.8 Intangible assets other than goodwill In accordance with the provisions of International Financial Reporting Standard No. 3 (IFRS 3), the negative capital gain from the acquisition of an investment or business combination, is credited directly to the income statement. The balances of higher values a) Aquaculture concessions existing at the beginning of the year are credited to the accumulated results as a consequence of the adoption of IFRS 3. Aquaculture concessions acquired from third parties are presented at historical cost. The useful life of such concessions is indefinite, because they have no expiry date nor a foreseeable useful life, therefore, they are not amortized. Concessions obtained under the new fishing law have a renewable useful life of 25 years, and the Company will meet all the legal requirements to renew 2.10 Interest costs those concessions. Consequently, the accounting treatment will be the same as that for concessions with indefinite useful life. Any interest costs incurred in the construction of any qualified asset are capitalized over the period required to complete and b) Computer programs prepare the asset for its intended use. Other interest costs are expensed. Licenses for purchased software are capitalized on the basis of the costs incurred to purchase and prepare them to use the specific program. These costs are amortized over their estimated useful lives of 4 years. 2.11 Impairment of non-financial assets Expenses for developing or maintaining computer software are expensed when incurred. Costs directly related to creating unique, Assets with indefinite useful lives are not amortized and are tested annually for impairment losses. identifiable computer software controlled by Australis Seafoods S.A. and its subsidiaries that is likely to generate financial benefits in excess of its costs for more than one year are recognized as intangible assets. Direct costs include expenses for personnel that Depreciated property, plant and equipment is tested for impairment whenever any event or change in circumstances indicates develop the software and any expense incurred in its development and maintenance. that the book value of assets may not be recoverable. An impairment loss is recognized if the book value of an asset exceeds its recoverable amount. c) Water rights These are water rights associated with the technical projects at fish farms. These rights are indefinite and are not amortized. Water The recoverable amount of an asset is the greater of its value in use and its fair value less selling costs. Impairment is assessed by rights acquired from third parties are presented at historical cost. grouping assets at the lowest levels at which they generate separately identifiable cash flows (cash-generating units).
d) Research and development expenses Non-financial assets other than goodwill that have been impaired are reviewed at every reporting date to identify whether any Research expenses are expensed when incurred. Costs incurred on development projects related to the design and testing of new impairment reversals have occurred. or improved products are recorded as an intangible asset when the following requirements are met. Impairment losses can be reversed, but are limited to losses recognized in previous periods, in such a manner that the book value i) It is technically feasible to fully produce the intangible asset, to the point where it can be used or sold. becomes the same as if these impairment adjustments had never been made. This reverse is recorded in other losses.
ii) Management intends to complete the intangible asset, and to use or sell it. 2.12 Financial assets iii) The Company can use or sell it. Financial assets within the scope of IFRS 9 are classified according to the business model used by the Group to manage its financial iv) The Company can demonstrate how the intangible asset is likely to generate financial benefits in the future. instruments and contractually established cash flows. The group classified its financial assets at amortized cost and/or at fair value with changes in profit and loss or equity, as appropriate. v) The Company has sufficient technical, financial or other resources, to complete development and to use or sell it. Financial investments not classified at fair value through profit and loss are initially recognized at fair value plus directly attributable vi) The expenditure attributable to developing it can be reliably measured. transaction costs.
The Company and its subsidiaries classifies its financial assets after initial recognition and, when permitted and appropriate, reassesses this classification at each reporting date. 2.9 Goodwill All regular purchases and sales of financial assets are recognized on the trade date, which is the date on which the company Goodwill represents the excess of the acquisition cost over the fair value of the Group's participation in the identifiable net assets of becomes committed to the trade. Regular purchases and sales are purchases or sales of financial assets that require assets to be the subsidiary / affiliate acquired on the acquisition date. delivered within the time frame established generally by regulation or market convention. The following investment classifications are used: Goodwill related to acquisitions of affiliates is included in investments in affiliates and is tested for impairment along with the total balance of the associate. The separately recognized goodwill is tested for impairment annually and is valued at cost less accumulated Financial assets at fair value through profit and loss include financial assets held for sale and financial assets initially recognized at impairment losses. Gains and losses from the sale of an entity include the book value of the goodwill related to the entity sold. fair value through profit and loss.
Financial assets are classified as held for sale if they are acquired for the purpose of selling them in the short term. 112 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 113
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Derivatives, including separate embedded derivatives, are also classified as held for sale, unless designated as effective hedging low risk of loss in value. They also include cash management investments, such as covenants with repurchase and resale agreements instruments, or as financial guarantee contracts. Gains or losses on held-for-sale instruments are recognized in the income that mature before the same deadline. statement. Cash flows from operating activities include all cash flows related to the Company’s businesses and any cash flow not defined as The entity classified financial assets at amortized cost when the asset complies with the following two conditions: i) The financial investing or financing. asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest Any bank overdrafts are included in other financial liabilities. on the principal amount outstanding.
Financial assets are classified at fair value with changes in other comprehensive income if they meet the following two conditions: i) 2.16 Share capital They are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal Share capital consists of single class, ordinary shares. and interest on the principal amount outstanding. Legal minimum dividends on ordinary shares are recognized as a reduction in equity when they are accrued. Derivative financial instruments to hedge risks associated with fluctuations in interest rates and exchange rates are initially recognized at fair value at the date the derivative contract is signed and are subsequently classified at fair value. Derivatives are recorded as assets (other financial assets) when their fair value is positive and as liabilities (other financial liabilities) when their fair 2.17 Trade and other payables value is negative. Trade and other payables are recorded initially at their fair value and subsequently at their amortized cost using the effective interest method when they have a payment term of over 90 days. If the payment term is less than 90 days, the nominal value is used, as the 2.13 Inventories difference between nominal value and fair value is not significant.
Inventories are valued at the lower of cost or net realizable value. Cost is determined using the weighted average price method. 2.18 Investments in associates
The cost of finished products and work in progress includes raw material costs (value of biological assets harvested including their Associates are all those companies over which Australis Seafoods S.A. and its subsidiaries have significant influence, but do not fair value effects), direct labor costs, other direct costs and manufacturing overheads (based on a normal operating capacity). control their financial and operational policies. Investments in associates are accounted for upon generation or purchase at cost and are subsequently valued using the equity method. The investment of Australis Seafoods S.A. and its subsidiaries in associates Net realizable value is the estimated sales price during the normal course of business, less any variable selling costs. includes any goodwill identified on acquisition, net of any accumulated impairment losses.
Obsolete or slow-moving products are recognized at their recoverable value. The share of Australis Seafoods S.A. and its subsidiaries in the income and losses of associates after acquisition is recognized in the statement of income and their share of subsequent equity movements is recognized in the corresponding reserve within equity. When the share of Australis Seafoods S.A. and its subsidiaries in the losses of an associate is equal or higher than its investment in 2.14 Trade and other receivables the associate, including any other unsecured receivable, Australis Seafoods S.A. and its subsidiaries will not record additional losses, unless it has entered into obligations or made payments on behalf of the associate. Trade and other accounts receivable are recorded at nominal value, since the average maturity terms do not exceed 90 days. Income related to the highest payment term, if any, is recorded as deferred income in the current liability and the accrued portion On February 6, 2014, Australis Seafoods S.A. and 3 companies formed the New World Currents consortium. Its purpose is to is recorded in financial income. strengthen marketing of the Company’s products in China.
In addition, estimates are made on those doubtful debt allowances on the basis of an objective check of all amounts pending at the On November 26, 2019 Australis Seafoods SA, sells its stake in New Word Currents consortium closing date of the financial statements. Impairment losses relating to doubtful credits are recorded in the income statement in the year in which they are produced. Trade credits are included under current assets within trade and other receivables, provided that their estimate of collection does not exceed one year from the date of the statement of financial position. 2.19 Financial liabilities
Debt and equity instruments are classified as either financial liabilities or equity, based on the substance of the contractual 2.15 Cash and cash equivalents agreement.
Australis Seafoods S.A.'s cash and cash equivalents consist of cash on hand and in bank current accounts, time deposits and other Equity instruments - An equity instrument is any contract that evidences a residual interest in the assets of a company after financial investments (marketable securities with easy settlement) that mature within 90 days of the investment date and have a deducting all of its liabilities. Equity instruments are recorded at the value of the consideration received, net of direct issuance costs. 114 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 115
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Provisions for onerous contracts, litigations and other contingencies are recognized when: Financial liabilities – Financial liabilities are classified either as financial liabilities “at fair value through profit and loss”, or as “other financial liabilities”. (i) Australis Seafoods S.A. and its subsidiaries have a current legal or implicit obligation as a result of past events. (ii) It is likely that a payment will be necessary to settle the obligation. a) Financial liabilities are classified at fair value through profit and loss when these are held for sale or are designated as such. (iii) The value can be reliably estimated.
b) Other financial liabilities, including loans, are valued initially at the amount of cash received, net of transaction costs. Other Provisions are valued at the best estimate by Australis Seafoods S.A. and its subsidiaries of present value of the payments required financial liabilities are subsequently classified at amortized cost using the effective interest method, recognizing the interest to settle the obligation. The discount rate used for calculating the present value reflects the market’s present estimates at the expense based on the effective interest rate. reporting date of the time value of money and the risk relating to that particular liability.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense throughout the corresponding period. The effective interest rate is the rate that exactly discounts the estimated cash flows payable 2.23 Revenue recognition over the expected life of the financial liability, or when appropriate, a shorter period when the associated liability has a prepayment option that is expected to be exercised. Group operating revenue is recognized when control over its products is transferred, which is when products have been delivered to the customer and the customer has full discretion over how to sell them and at what price, and there is no unsatisfied obligation that may affect the customer’s acceptance of these products. Delivery is complete when products have been sent to the location 2.20 Current and deferred income taxes specified by the customer, obsolescence and loss risks have been transferred to the customer, and the customer has accepted the products in accordance with the sale contract, the acceptance provisions have expired, or the Group has objective evidence that all Deferred tax is calculated using current tax rates and laws, or those about to be approved in each country at the reporting date, the acceptance criteria have been satisfied. which are expected to apply when the corresponding deferred tax asset is collected or deferred tax liability is settled. When the sale contract includes volume discounts based on total sales during a specific period, operating revenue is based on the Deferred taxes are calculated using the liability method on temporary differences that arise between the tax value of assets and contract price, net of estimated volume discounts. Experience is used to estimate discounts using the expected value method, and liabilities and their book values. However, if deferred taxes arise from the initial recognition of a liability or an asset in a transaction operating revenue is recognized when it is very likely that there will be no significant changes. A liability is recognized for expected other than a business combination, which at the time of the transaction do not affect accounting net income nor taxable profit, volume discounts on sales through to the end of the reporting period. There is no financing component, as credit sales are unusual then they are not recognized. and these have very short payment periods, which is consistent with market practice. A provision is recognized to reflect the Group’s obligation to refund any defective products under its standard warranty terms. Deferred tax assets are recorded when it is deemed probable that the entities of the Group will have sufficient future taxable profit or sufficient deferred tax liabilities to offset them. Receivables are recognized when products have been delivered, since this is the moment when payment becomes unconditional and it is simply a matter of time before payment is made. The Company does not have deferred taxes on temporary differences arising from investments in subsidiaries since it controls the date in which these are to be reversed. 2.24 Leases
2.21 Employee benefits When a Group entity is the lessee – Financial lease
a) Employee vacations Australis Seafoods S.A. and its subsidiaries lease certain fixed assets. Fixed asset leases are classified as financial leases, when the Australis Seafoods S.A. and its subsidiaries recognize the expense for employee vacations at their nominal value using the accrual Company has substantially all the risks and benefits inherent to ownership. Financial leases are capitalized at the lease’s inception at method. the fair value of the property or leased asset or at the present value of the lease’s minimum payments, whichever is lower.
b) Other employee benefits Each lease payment is divided between financial liabilities and expenses to obtain a constant interest rate over the outstanding The Company records a liability for bonuses payable to employees, when it is contractually committed or when practice in the past balance. The respective lease obligations, net of financial costs, are included in other financial liabilities. The interest element of the has generated an implicit obligation. financial cost is expensed during the lease period at a rate that achieves a constant interest rate over the remaining liability for each period. An asset acquired under a finance lease is depreciated over the lesser of its useful life or the lease term.
2.22 Provisions Any differential arising on a sale and leaseback transaction are part of the asset’s value, according to the nature of the transaction. Australis Seafoods S.A. and its subsidiaries recognize a provision when contractually obliged or when practice in the past has This amount is added to leased assets and amortized over the useful life of the related leased asset. generated an implicit obligation. When a Group entity is the lessee – Operating lease 116 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 117
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At the inception of a contract, the Company assesses whether the contract is, or contains, a lease, i.e. whether the contract gives 2.27 Non-current assets held-for-sale the right to control the use of an asset, for a period of time in exchange for a consideration. To assess whether a contract gives the right to control the use of an identified asset, Australis Seafoods S.A. assesses whether: i) The contract implies the use of an The Company classifies property, plant and equipment as non-current assets held-for-sale, and other non-current financial identified asset. This can be specified explicitly or implicitly. If the supplier has a substantial right of substitution, then the asset assets awaiting disposal, when arrangements for their sale had already begun at the reporting date, and it is probable that those is not identified; ii) The Company has the right to obtain substantially all the economic benefits from the use of the asset during transactions will be completed within the twelve months of that date. the period; and iii) The Company has the right to manage the use of the asset, this right is exercised when the decision-making is relevant, for example, how and for what purpose the asset is used. At the inception or revaluation of a contract containing a lease Assets awaiting disposal are valued at the lower of the book value and fair value less selling costs. They cease to be depreciated when component, the Company assigns the consideration in the contract to each lease component based on its independent relative they are classified as non-current assets held-for-sale. prices, i.e. allocating the related cost of capital separately.
Australis Seafoods S.A. records a right to use the asset and a lease liability on the date of inception of the lease. The right to use the asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made NOTE 3 - FINANCIAL RISK MANAGEMENT on or before the inception date, plus the initial direct costs incurred and an estimate of the costs to dismantle and eliminate the underlying asset or to restore the underlying asset or the site at which it is located, less any lease incentives received. The salmon business is intrinsically exposed to several risk factors that affect the industry’s development in one way or another. These factors may include the following:
2.25 Dividend policy I. Credit risk a) Surplus cash investment risk Corporate Law requires the Company to distribute a minimum dividend equivalent to 30 % of distributable net income, except The selection of financial institutions and their financial investments to be used by Australis Seafoods S.A. and its subsidiaries are when shareholders unanimously agree an amount below that percentage. defined by the low risk policy adopted by the Company.
Under IFRS, this obligation to shareholders must be recognized before the closing date of the annual financial statements with the b) Sales risk resulting decrease in equity. The terms of sale for Australis Seafoods S.A. and its subsidiaries include with cash, with letters of credit, with payment in advance, and with credit for customers with good payment performance. Many of the customers with credit, especially in Brazil, have As instructed by the Financial Markets Commission in Circular 1945, the dividend calculation for 2016 is based on distributable insurance in case of non-compliance. In fact, doubtful receivables for the subsidiary Australis Mar S.A. at the reporting date net income for the parent company, which excludes the following from its net income for the year: amounted to ThUS$ 203 (ThUS$ 187 as of December 31, 2018).
i) Unrealized income relating to recognizing increases in the fair value of biological assets regulated by the accounting standard II. Liquidity risk “IAS 41”. This income will be recognized as net distributable income when such assets have been realized. For these purposes, Liquidity risk arises if a mismatch arises between the Company’s financing needs (operating and financial expenses, investments, realized means the portion of those increases in fair value corresponding to assets sold or disposed of by any other means. loan repayments and dividend commitments) and its sources of finance (proceeds from redeeming marketable securities or financial placements, collecting customer receivables and finance from financial institutions). The Company has a prudent liquidity ii) The effects of deferred taxes associated with the items indicated in i) will be recognized in the same manner as the item that risk management and review policy that aims to maintain sufficient available finance with banks and through access to capital originated them. markets.
The following table details the capital and interest flows of the principal liabilities grouped by maturity range: 2.26 Environment
Disbursements relating to improvements or investments in production processes that improve environmental conditions are Overdue 1 to 3 3 and 12 1 to 5 Over expensed in the period in which they arise. When these disbursements are part of investment projects, they are recognized as an debts months Months years 5 years Total increase in the value of property, plant and equipment. ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Bank loans - 246 89 130.000 - 130.335 The group has established the following disbursements types for environmental protection projects: Finance lease obligations - 1.554 4.414 17.435 9.131 32.534 a) Expenses associated with the activity’s legal compliance. These expenses can include the following: monitoring liquid waste from Suppliers 26.346 105.214 28.344 - - 159.904 fish farms, dead fish removal service, maintenance of liquid waste treatment plants, etc. Payables - - 7.879 - - 7.879 b) Additional expenses aimed at improving productive processes. These expenses include installing UV disinfection systems, Total 26.346 107.014 40.726 147.435 9.131 330.652 analyzing oceanographic information, staff training on environmental variables, implementing biosecurity measures and control over infectious carriers, etc. 118 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 119
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III. Market risk b) Asset impairment The Group annually evaluates asset impairment based on each cash generating unit (CGU) in accordance with IAS 36. The assets a) Exchange rate risk included in this evaluation are property, plant and equipment, and intangible assets other than goodwill. As some intangible assets Given that most of the group’s sales are denominated in US dollars, there is an implied risk in the value of this currency compared have an indefinite useful life, the Group evaluates evidence of their impairment at each reporting date. to the Chilean peso. Therefore, appreciation and depreciation of the local currency directly affects the Company’s results since part of its cash flows are in local currency. Therefore, as there is no active market to calculate the fair value of these assets, the Company uses the value in use method to evaluate evidence of impairment. As of December 31, 2019, the Company has consolidated net assets of ThUS$ 458. Consequently, a 5% increase in the exchange rate results in an exchange rate income of ThUS$ 23, while a 5% decrease in the exchange rates results in a gain of the same Evidence of impairment on the assets included in cash generating units (CGU) has been evaluated. Property, plant and equipment amount. and intangible assets.
b) Interest rate risk The Group's cash-generating unit is marketing salmon and trout, according to its business model. Movements in interest rates modify the expected cash flows on assets and liabilities that are subject to variable interest rates. The Group has used a cash flow forecasting model to calculate the value in use of its assets, based on the following assumptions. Australis Seafoods S.A. and its subsidiaries are exposed to interest rate risk. Long-term financing for Australis Mar S.A. is at the 90-day libor rate plus an additional variable spread. However, long-term financing for Australis Agua Dulce S.A. is at fixed rates. 1. Three year evaluation horizon. Investments in the industry are long-term, which means that a horizon below 3 years would not Management and Board of directors usually monitor the conditions for these loans and they evaluate the benefit of taking out represent the Company’s situation. interest rate insurance, in order to diminish the impact of the changes in the 90-day libor rate. 2. Forecast cash flows. Cash flows used in the methodology are based on budget data, best estimates and reasonable and As of December 31, 2019 the group has a total of ThUS$ 130,000 in bank liabilities in US dollars at variable rates. Sensitivity substantiated assumptions that represent Management’s best estimates, taking into account the prevailing economic conditions analysis was performed on the interest rates for the outstanding capital on these bank liabilities. When current interest rates are during the remaining useful life of the evaluated assets. The most important assumptions are: increased or decreased by 1% per annum, the effect on the statement of net income for the year would be higher or lower financial 2.1. Sales and production forecast for the next 3 years. expenses of ThUS$6,033, respectively. 2.2. Forecast cash flows do not include any residual asset value at the end of the third year.
c) Market risk Cash flow forecasts are brought to present value using a discount rate that reflects the time value of money and the risks specific Salmon products are defined as commodities that are subject to changes in international market prices. Accordingly, our to the asset. The Weighted Average Cost of Capital (WACC) rate is used, calculated on the basis of the following variables: The accumulated experience indicates that the prices of our products are subject to seasonality that pushes them upwards and Company or industry beta; the risk-free rate of return; the market rate of return; the cost of the Company’s financial debt; and the downwards to produce cyclical variations over time. long-term target debt/equity ratio.
A change of 10% / -10% in the average product sale price would increase or decrease the gross margin by ThUS$39,408. As a result of this evaluation, no evidence was found of impairment of the assets included in the CGU (property, plant and equipment and intangible assets).
NOTE 4 - SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS NOTE 5 – ACCOUNTING CHANGES Accounting estimates and assumptions are continually evaluated, and are based on historical experience and other factors, including expectations of future events that are considered reasonable in the circumstances. Change in determination of fair value of biological assets
Australis Seafoods S.A. and its subsidiaries prepare estimates and assumptions regarding the future. Estimates and assumptions On January 3, 2020, the Financial Market Commission (CMF), through the issuance of Circular Letter No. 447, instructs that, that have a significant risk of causing material changes in assets and liabilities are presented below. starting from the financial statements as of December 31, 2019, it should apply a model for measuring fair value on biological assets, suggesting at least since the fish reach an average weight of 1 kilogram, using a discounted flow methodology. a) Biological assets The estimated fair value of fish biomass is the Company’s best estimate based on its experience, technology and productive models. Thus, the company has applied changes in its accounting criteria considering the provisions established in IAS 8 "Accounting The principal estimates are: fish biomass volume, biomass average weights, raw material yields and biomass growth. policies, changes in accounting estimates and errors".
Variations in estimates of biomass and the distribution of fish size at harvest will be minor under normal sanitary conditions, as these Previously, the biological asset valuation approach was based on measuring biomass with a weight below the minimum harvestable can produce variations in prices. weight at cost and for higher weights it was valued at fair value. In this way, all the biomass over 4 kg. wfe. for Salar Salmon and 2.3 kg. wfe. for Coho Salmon and trout at the end of the period was valued considering the prices available to date and discounting the 120 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 121
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costs of harvesting, processing, packaging, distribution and sale. Balances at 12.31.2018 Balances at 12.31.2018 (Before) Adjustments (Adjusted) Based on these consolidated financial statements, Australis Seafoods S.A. has opted for a discounted cash flow model or present Statement of income MUS$ MUS$ MUS$ value method to determine fair value, which, through a discount rate determined for each farm, which reflects the risk and value of the concession, in accordance with the definitions contained in IAS 41, allows the adjustment to fair value of the biological asset (Charge) credit to the income statement for the fair (88,231) 49,894 (38,337) that is in different stages of growth to be taken to present value. value of biological assets harvested and sold
Valuation is carried out for each farming center on the basis of parameters such as: biomass, growth, projected mortality, time (Charge) credit to the income statement for the fair and costs on completion. The quality of the fish in the future, the processing and marketing costs are considered at the company 82,677 (24,606) 58,071 value of growth in biological assets for the year level and are fixed regardless of the location of the farming center. Prices are discounted for the costs of harvesting, processing, packaging, distribution and sale. Tax expenses (16,194) (6,849) (23,043) The model is described in more detail in point 2.7.
The Company has restated the financial statements as of December 31, 2018, in accordance with International Financial Reporting Standards, recording an increase in the biological assets account of ThUS$53,877, an increase in the deferred tax liability of b) Adjustments to the consolidated statement of financial position as of January 1, 2018 ThUS$14,142 and an increase in equity of ThUS$38,395 due to a change in accounting policies. Balances at 01.01.2018 Balances at 01.01.2018 (Before) Adjustments (Adjusted) a) Adjustments to the consolidated financial statements as of December 31, 2018 Statements of financial position MUS$ MUS$ MUS$
Changes in current assets Biological assets, currents 120,857 7,333 128,190 Balances at 12.31.2018 Balances at 12.31.2018 (Before) Adjustments (Adjusted) Changes in non- current assets Statements of financial position MUS$ MUS$ MUS$ Biological assets, non currents 35,508 19,882 55,390 Changes in current assets Inventories 46,123 (1,281) 44,842 Changes in liabilities, non - current Biological assets 155,260 34,006 189,266 Deferred tax liabilities 28,096 7,345 35,441 Changes in non- current assets Changes in equity Biological assets 36,225 19,871 56,096 Retained earnings (65,546) 19,870 (45,676) Deferred tax assets 22,235 (59) 22,176 These consolidated financial statements do not present other accounting changes with respect to the fiscal year ended December Changes in liabilities, non - current 31, 2019 and 2018. Deferred tax liabilities 31,297 14,142 45,439
Changes in equity Retained earnings (23,360) 38,395 15,035 NOTE 6 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes balances held in bank checking accounts, time deposits and other financial investments that mature in under 90 days.
Cash and cash equivalents as of December 31, 2019 and 2018 are as follows.
12/31/2019 12/31/2018 ThUS$ ThUS$ Audited Audited
Cash in Chilean pesos 10 31 Bank balances 7,189 3,751 Fixed funds 35 28 Mutual funds 4,024 13,296 Total cash and cash equivalents 11,258 17,106 122 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 123
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Balances by currency that make up cash and cash equivalents as of December 31, 2019 and December 31, 2018, are as follows: Liabilities at fair value through profit and loss Other financial liabilities Total 12/31/2019 12/31/2018 As of December 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ AUDITED Currency Audited Audited
US dollar 9,498 16,429 Trade and other payables - 179,093 179,093
Chilean peso 1,760 677 Other financial liabilities, current 5,583 - 5,583
Total 11,258 17,106 Other financial liabilities, non-current 154,273 - 154,273 Total 159,856 179,093 338,949
12/31/2019 12/31/2018 Financial Financial assets at fair Financial assets at ThUS$ ThUS$ assets at value through other fair value through Mutual fund investments Audited Audited amortized cost comprehensive income profit and loss Total As of December 31, 2018 ThUS$ ThUS$ ThUS$ ThUS$ Banchile - 420 AUDITED Larraín Vial - 3 Cash and cash equivalents 3,810 - 13,296 17,106 Banco Santander 1,334 11,873 Trade and other receivables 39,274 - - 39,274 Banco BCI 2,690 1,000 Total 43,084 - 13,296 56,380 Total mutual fund investments 4,024 13,296
Mutual funds are fixed income and recognized at unit market value at the reporting date. Liabilities at fair value Mutual funds are held by the group until it has to meet its operating obligations. through profit and loss Other financial liabilities Total As of December 31, 2018 ThUS$ ThUS$ ThUS$ Cash and cash equivalents presented in the statement of cash flows are as follows: AUDITED
12/31/2019 12/31/2018 Trade and other payables - 101,902 101,902 ThUS$ ThUS$ Assets Audited Audited Other financial liabilities, current 28,766 - 28,766
Cash and cash equivalents 11,258 17,106 Other financial liabilities, non-current 94,815 - 94,815
Cash and cash equivalents presented in the statement of cash flows 11,258 17,106 Total 123,581 101,902 225,483
NOTE 7 – FINANCIAL INSTRUMENTS 7.b) Credit rating of financial assets The Company’s financial assets can be classified into two groups: 7.a) Financial instruments by category i) Trade receivables from customers. Their risk is evaluated by ageing the debt and doubtful debt allowances are recorded. ii) Financial assets at fair Financial assets at fair Financial assets at value through other value through profit Financial investments in accordance with the assumptions disclosed in Note 2. amortized cost comprehensive income and loss Total As of December 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$
AUDITED 12/31/2019 12/31/2018 ThUS$ ThUS$ Audited Audited Cash and cash equivalents 7,234 - 4,024 11,258 Mutual funds and time deposits classified as AA+fm/M1 4,024 13,296 Trade and other receivables 30,095 - - 30,095 Bank checking accounts classified as AAA 7,189 3,751 Total 37,329 - 4,024 41,353 Total 11,213 17,047 124 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 125
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None of these unexpired financial assets have been renegotiated during the period. The Company has valued these instruments as indicated in the following table, in order to meet fair value disclosure requirements:
7.c) Fair value estimates 12/31/2019 12/31/2018
The Company has financial instruments recorded at fair value as of December 31, 2019 and 2018. These include: Book value Fair value Book value Fair value ThUS$ ThUS$ ThUS$ ThUS$ a) Investments in short-term mutual funds (cash equivalents). AUDITED AUDITED
The Company has classified the valuation of fair value using a hierarchy that reflects the level of information used in this valuation. Cash and cash equivalents The hierarchy has 3 levels, (I) fair value based on quoted prices in active markets for similar assets or liabilities, (II) fair value based on valuation techniques that use information about market prices or derived from market prices of similar financial instruments, Mutual funds 4,024 4,024 13,296 13,296 and (III) fair value based on valuation models that do not use market data. Trade and other receivables 30,095 30,095 39,274 39,274
The fair value of financial instruments traded in active markets, such as investments acquired for trading, is based on quoted prices Other financial liabilities, current 5,583 5,583 28,766 28,766 at the reporting date using the current bid price. Other financial liabilities, non-current 154,273 154,273 94,815 94,815 Trade and other payables, current 179,093 179,093 101,902 101,902 The classification of financial instruments at fair value according to the data used to value them as of December 31, 2019 and 2018 are as follows. The book value of receivables and payables is assumed to be approximately their fair value, due to their short-term nature. The fair value of time deposits and other non-current payables is approximately their book value.
Fair values using these levels Fair value as of NOTE 8 – OTHER NON-FINANCIAL ASSETS, CURRENT 12/31/2019 Level I Level II Level III ThUS$ ThUS$ ThUS$ ThUS$ Other current non-financial assets are as follows:
Assets 12/31/2019 12/31/2018 ThUS$ ThUS$ Short-term mutual funds 4,024 4,024 - - Audited Audited
Total 4,024 4,024 - - Prepaid expenses 4,359 2,419 Prepaid insurance 1,499 1,892 Liabilities Other non-financial assets, current 161 62 Cash flow hedge - - - - Total 6,019 4,373 Total - - - - NOTE 9 - TRADE AND OTHER RECEIVABLES
Fair values using these levels Fair value as of Trade and other receivables are as follows: 12/31/2018 Level I Level II Level III ThUS$ ThUS$ ThUS$ ThUS$ 12/31/2019 12/31/2018 ThUS$ ThUS$ Assets Audited Audited
Short-term mutual funds 13,296 13,296 - - Trade receivables, domestic 4,987 7,637
Total 13,296 13,296 - - Trade receivables, foreign 22,266 26,842 Doubtful debt allowance (203) (187)
Liabilities Trade receivables, net 27,050 34,292 Cash flow hedge - - Other receivables 3,045 4,982 Total - - Total 30,095 39,274 126 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 127
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The fair values of trade and other receivables do not significantly differ from their book values. After completing preliminary and judicial collection procedures, assets are written-off against the allowance. The Company only uses the provision method and not the direct write-off method, to improve control. Trade and other receivables by currency as of December 31, 2019 and 2018 are as follows: Historical and current renegotiations are largely irrelevant and the policy is to analyze impairment on a case by case basis, and classify each one by its risk, and evaluate whether it should be reclassified to preliminary collection. If reclassification is appropriate, 12/31/2019 12/31/2018 an allowance is recognized for the customer’s overdue and not yet due receivables. ThUS$ ThUS$ Audited Audited The parent company and its subsidiaries consider that they are not exposed to a high liquidity risk due to these financial assets, Currency given that the credit quality is protected by a highly diversified customer portfolio, which are economically and geographically dispersed and belong to countries with a low level of sovereign risk. US dollar 27,759 36,223
Chilean peso 2,336 3,051 There are no guarantees for credit granted to customers with a stable commercial relationship and excellent payment behavior, Total 30,095 39,274 or for customers who pay in advance. However, there are insurance contracts that cover credit risks for specific customers or markets. Trade receivables can be classified as follows: The maximum exposure to credit risk at the reporting date is the fair value of each category of receivables. 12/31/2019 12/31/2018 ThUS$ ThUS$ Audited Audited As of December 31, 2019 As of December 31, 2018
Salmonid products 26,130 31,204 Gross Net Gross Gross impaired exposure risk Gross impaired Net exposure risk Other products 920 3,088 balances balances concentration balances balances concentration ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Total 27,050 34,292 Trade receivables 27,253 (203) 27,050 34,479 (187) 34,292 The Company does not have an individually impaired trade and other receivables that have been renegotiated. Other receivables 3,045 - 3,045 4,982 - 4,982
The Company recognizes allowances when there is evidence of trade receivables being impaired. The criteria used to determine Total 30,298 (203) 30,095 39,461 (187) 39,274 whether there is objective evidence of impairment are the portfolio age, specific impairment events (default) and specific market indications. Portfolio stratification
Aging Impairment The portfolio as of December 31, 2019 and 2018 is as follows: Receivables greater than 1 year 100% December 31, 2019
Documents in judicial collection procedures 100% Number of customers Net value of non-Number of customers Net value of Overdue ranges (Audited) in non-renegotiated renegotiated in renegotiated renegotiated Net value portfolio portfolio portfolio portfolio of total portfolio The movements in doubtful debt allowances for trade and other receivables as of December 31, 2019 and 2018 are as follows: Not yet due 379 21,642 - - 21,642 12/31/2019 12/31/2018 ThUS$ ThUS$ 1-30 days 357 5,317 - - 5,317 Audited Audited 31 to 60 days 18 40 - - 40 Opening balance (187) (72) 61 to 90 days 8 14 - - 14 Write-offs 117 - 91 to 120 days 3 4 - - 4 Bad debts recovered - - 121 to 150 days 3 3 - - 3 Increases in allowances (133) (115) 151 to 180 days 2 5 - - 5 Closing balance (203) (187) 181 to 210 days 3 1 - - 1 211 to 250 days 3 7 - - 7 > 250 days 9 17 - - 17
Total 785 27,050 - - 27,050 128 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 129
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a) Related party receivables, current December 31, 2018
Number of customers Net value of non-Number of customers Net value of Chilean ID Country 12/31/2019 12/31/2018 Overdue ranges (Audited) in non-renegotiated renegotiated in renegotiated renegotiated Net value Company Number Relationship of origin Currency ThUS$ ThUS$ portfolio portfolio portfolio portfolio of total portfolio Joyvio Zhencheng (Qingdao) Food - Indirect China Dollar 2,537 - Not yet due 118 27,042 - - 27,042 Joyvio (Shanghai) Food Co., Lt - Indirect China Dollar 552 - 1-30 days 82 6,923 - - 6,923 Total 3,089 - 31 to 60 days 20 94 - - 94 61 to 90 days 6 12 - - 12 b) Related party payables, non - current 91 to 120 days 17 63 - - 63 121 to 150 days 6 134 - - 134 Chilean ID Country 12/31/2019 12/31/2018 151 to 180 days 5 24 - - 24 Company Number Relationship of origin Currency ThUS$ ThUS$ 181 to 210 days - - - - - Transportes Naviera Austral S.A. 77.084.981-0 Indirect Chile Dollar 6 - 211 to 250 days - - - - - Total 6 - > 250 days - - - - -
Total 254 34,292 - - 34,292
c) Transactions with related parties and their effect on the statement of net income. NOTE 10 – RELATED PARTY RECEIVABLES AND PAYABLES Transactions and their effects on the statement of net income for the years ended December 31, 2019 and 2018 are as follows.
Related parties comprise the following entities and individuals.
a) Shareholders that can exercise control. b) Subsidiaries and their members. 12/31/2019 12/31/2018 c) Parties with sufficient interest to give them significant influence. Effect on Effect on d) Parties with joint control. Chilean ID Country Amount net income Amount net income e) Associates. Company Number Relationship of origin Description Currency ThUS$ ThUS$ ThUS$ ThUS$ f) Interests in joint ventures. AUDITED AUDITED g) Senior management of the entity or its parent company. h) Close relatives of individuals described under the previous points. Joyvio Zhencheng (Qingdao) Food - Indirect China Sales of finish Dollar 2,716 843 - - i) An entity that is controlled, or jointly controlled, or is significantly influenced by any of the individuals described in the two products previous points, which requires that a significant proportion of the voting right is held directly or indirectly by any of the individuals Joyvio (Shanghai) Food Co., Lt - Indirect China Sales of finish Dollar 1,087 261 - - described in the two previous points. products Joyvio Zhencheng (Qingdao) Food - Indirect China Collect Dollar (179) - - - Generally transactions with related companies are payable/receivable immediately and are not subject to special conditions. These transactions comply with Articles 146 and 49 of Law 18,046 on Corporations. Joyvio Zhencheng (Qingdao) Food - Indirect China Collect Dollar (536) - - -
The transfers of short-term funds between related companies and the parent company, which do not relate to the collection or The policy at Australis Seafoods S.A. and its subsidiaries is to disclose all transactions with related parties exceeding ThUS$ 10 payment of services, are recorded using commercial current accounts. during the year, except for dividends paid and capital contributions received, which are disclosed in equity. 130 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 131
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d) Remuneration of the Board of Directors, Directors’ Committee members and senior management Movements in finished products for the years ended December 31, 2019 and 2018 are as follows: Directors’ remuneration for the year ended December 31, 2019 was ThUS$ 195 (ThUS$ 240 for the year ended December 31, 2018). 12/31/2019 12/31/2018 ThUS$ ThUS$ Movement of finished products Audited Audited Total gross executive remuneration at Australis Seafoods S.A. and subsidiaries was ThUS$ 4,389. (ThUS$ 3,754 for the year ended December 31, 2018). Opening balance 29,823 35,662 Processing increases 81,370 67,731 This remuneration includes incentive schemes paying an annual bonus to its senior executives and positions selected by the Company. They are provisioned in the period that the related targets are met. Increase in harvested raw material 236,922 185,384 Decrease for sales of finished products (316,247) (254,989) This scheme aims to motivate, reward and improve executive loyalty by rewarding good individual performance and team work. Other increases (decreases) 119 294
The managers and executives selected were those with authority and responsibility for directly or indirectly planning, directing Fair value of harvested biological assets 69,991 34,078 and controlling the business, including any Board member (whether or not they are executives) or member of the Company’s Fair value of harvested and sold biological assets (67,781) (38,877) equivalent governing body. Increase (reversal) in the net realizable value provision for finished products (4,635) 540 Closing balance 29,562 29,823
NOTE 11 – INVENTORIES Detailed composition of finished products 12/31/2019 12/31/2018 Inventories as of each reporting date are as follows: Species Status Product Quantity Cost Quantity Cost (Ton) ThUS$ (Ton) ThUS$
12/31/2019 12/31/2018 AUDITED AUDITED ThUS$ ThUS$ Inventories Audited Audited Atlantic Frozen Fillet 844 7,570 434 3,117
Finished products 34,534 29,566 Atlantic Frozen Head on 1,193 5,613 2,753 13,591 Finished products on consignment - 594 Atlantic Frozen Headless 15 110 3 16 Net realizable value provision (4,972) (337) Atlantic Frozen Others 364 3,376 239 1,971 Fuels and lubricants 1,300 833 Atlantic Fresh Fillet 130 992 54 515 Fish food 10,487 8,007 Atlantic Fresh Head on 167 766 2 13 Packaging supplies 1,002 883 Atlantic Fresh Headless 2 10 - - Atlantic Fresh Others 6 78 2 9 Medicines and additives 620 1,202 Total Atlantic 2,721 18,515 3,487 19,232 Materials and consumables 3,847 3,776 Trout Smoked Others 2 33 11 63 Others 158 318 Trout Frozen Others 43 523 - - Total 46,976 44,842 Trout Frozen Headless 363 2,461 737 4,410 Trout Frozen Fillet 294 2,897 239 2,030 Trout Fresh Fillet 13 136 2 38 Trout Fresh Others 197 958 2 17 Total Trout 912 7,008 991 6,558 Pacific Frozen Headless 433 3,026 - - Total Pacific 433 3,026 - - Grand Total 4,066 28,549 4,478 25,790 132 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 133
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Production cost by product included in this table does not include the fair value effects of biomass nor adjustment to net realizable Inventories recognized in cost of sales at the reporting date are summarized as follows: value.
Cumulative Detailed composition of finished products on consignment 12/31/2019 31/12/2018 12/31/2019 12/31/2018 ThUS$ ThUS$ Species Status Product Quantity Cost Quantity Cost Audited Audited (Ton) ThUS$ (Ton) ThUS$ Inventories transferred Audited Audited Audited Audited Cost of sales (316,247) (254,989) Atlantic Frozen Fillet - - 46 594 Total (316,247) (254,989) Total Atlantic - - 46 594 Grand Total - - 46 594 These tables do not include any reductions in net realizable value for each product. NOTE 12 - BIOLOGICAL ASSETS
Fair value adjustments to finished products were an increase of ThUS$ 5,985 as of December 31, 2019 and an increase of ThUS$ Biological assets at Australis Seafoods S.A. and its subsidiaries are composed of fish in seawater, and eggs, fry and smolts at 3,776 as of December 31, 2018. Australis Mar S.A.
Inventory policy The Company has restricted use of its biological assets, which have been pledged to guarantee its financial obligations.
Group inventory is valued at the lower of cost and net realizable value. The biological assets that Management deems will be harvested during the course of the next 12 months are classified as current biological assets. Inventory valuation policy
The Group values its inventories as follows. Current 12/31/2019 12/31/2018 ThUS$ ThUS$ a) The production cost of manufactured inventories comprises those that directly relate to the units produced, such as labor and Audited Audited fixed and variable costs incurred to transform raw materials into finished products. Sea water salmon and trout 294,368 189,266
The production cost of fresh and frozen salmon is based on the last fair value of the biological asset when harvested, plus direct and Total 294,368 189,266 indirect production costs.
12/31/2019 12/31/2018 b) The cost of purchased inventory includes its purchase cost, customs fees, transport, storage and other costs attributable to its Non-current acquisition. ThUS$ ThUS$ Audited Audited
Freshwater salmon and trout 18,935 15,217 Inventory cost calculation formula Sea water salmon and trout 53,416 40,879
Inventories of finished products are valued using the weighted average cost method, which is the cost of each product unit based on the weighted average cost at the beginning of the period and the cost of articles bought or produced during the period. Total sea water salmon and trout 347,784 230,145
Inventories of raw materials, packaging materials are valued at weighted average cost. Total freshwater salmon and trout 18,935 15,217 Total 366,719 245,362
Information on finished products
No inventory has been pledged in guarantee during the years ended December 31, 2019 and 2018. 134 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 135
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Movements in biological assets for the years ended December 31, 2019 and 2018 are as follows: The growth in fair value of biological assets during the years ended December 31, 2019 and 2018 is as follows:
12/31/2019 12/31/2018 Species ThUS$ ThUS$ Audited Audited 12/31/2019 12/31/2018 ThUS$ ThUS$ Atlantic 96,661 51,577 Audited Audited Pacific (2,004) - Opening biological assets 245,362 183,580 Trout 15,698 6.494 Increase from fattening and production 318,448 224,000 Total growth in fair value of biological assets 110,355 58.071 Decrease from harvests (at cost) (236,922) (185,384) Biological asset impairment - - Fair value increase/(decrease) for the year * 110,355 58,071 Total charge (credit) to the statement of net income 110,355 58.071 Decrease in fair value for harvests ** (69,991) (34,078)
Unusual mortality (533) (827) During 2019, the Company recognized a credit for fair value adjustments to its biological assets amounting to ThUS$ 110,355 Closing biological assets 366,719 245,362 (gain). The effects are disclosed in the statement of net income as a credit (charge) for the growth in the fair value of biological assets during the period.
A quantitative summary of biological assets as of December 31, 2019 and 2018 is as follows. Fair value adjustments as of December 31, 2019 and 2018 are as follows:
Production Fair Value 12/31/2019 12/31/2018 Fresh water Biomass Cost Adjustment Total Cost ThUS$ ThUS$ December 31, 2019 Audited Audited Ton ThUS$ ThUS$ ThUS$
AUDITED Eggs 21,359,697 21,376,018
Atlantic 37,128 163,244 94,512 257,756 Fry 9,580,363 6,661,718 Trout 11,266 60,377 19,594 79,971 Smolts 2,289,194 2,429,182 Pacific 2,949 12,124 (2,067) 10,057 Total freshwater 33,229,254 30,466,918 Total 51,343 235,745 112,039 347,784 12/31/2019 12/31/2018 Sea water ThUS$ ThUS$ Production Fair Value Audited Audited December 31, 2018 Biomass Cost Adjustment Total Cost Ton ThUS$ ThUS$ ThUS$ Growing fish 25,322,531 18,738,504 AUDITED Total sea water 25,322,531 18,738,504
Atlantic 30,393 122,873 59,777 182,650 Tons in sea water 51,343 38,543 Trout 8,150 35,600 11,895 47,495 Biological asset policies Total 38,543 158,473 71,672 230,145 Biological assets are valued at fair value less estimated selling costs according to the definitions included in IAS 41 and as established in Note 2.7.
Operational risks
As salmon are biological assets, their production is potentially exposed to a number of operational risks. Some of them are mentioned below. * Amounts recorded in the statement of net income as a result of biological asset growth. This effect is recorded separately in the statement of net income by function. ** Fair value adjustments transferred to finished products, as a result of harvesting during the year. 136 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 137
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a) Diseases: Although Australis Seafoods S.A. and its subsidiaries have made substantial investments in mass vaccination programs, NOTE 15 - INTANGIBLE ASSETS OTHER THAN GOODWILL systems to manage independent areas, fish health monitoring, low density policies in cages, nevertheless, diseases, parasites and pollutants are a constant problem in the aquaculture industry, which may reduce product quality, increase mortality and reduce Non-internally created intangible assets are as follows. production. 12/31/2019 12/31/2018 ThUS$ ThUS$ b) Moreover, the appearance of new diseases or pests affecting salmon production cannot be fully discarded. Useful life Audited Audited
c) Failure to comply with current legislation, and particularly the failure to comply with fallow periods and district regulations for Aquaculture concessions Indefinite 44,652 44,652 other production companies, may result in a reduction in the sanitary standards needed for healthy growth in the biomass. Water rights Indefinite 1,928 1,928 Water rights Finite 708 794 d) Predators: Salmon have natural predators, such as sea lions, who may cause biomass loss and even destroy cages. The industry has implemented several preventive measures, which contribute to mitigate the adverse effects caused by predators. Computer licenses Finite 2,710 3,184 Total 49,998 50,558 e) Natural risks: Salmon growth depends on the climatic and oceanographic conditions, such as changes in environmental brightness or in water temperature, among other factors. These may impact fish growth and their food consumption. a) Aquaculture concessions and water rights
f) Feed cost: Feed is the most important directly attributed production cost for salmon and trout. Its price varies due to variables Australis Seafoods S.A., through its subsidiaries, has concession requests progressing through various legal stages. The acquisition that cannot be controlled by the Australis Seafoods Group, such as the price of fish meal, which in turn depends on the costs of of these requests in progress has resulted in payments related to compliance with the various stages in the process. These the extractive fishing industry. contingent liabilities are not recorded, as required by IAS 38. However, in order to comply with the disclosure requirements, the probable disbursement for 2019 is expected to be UF 41,000 and the total disbursement in subsequent years to be UF 29,000. When the conditions are met to make the liability certain, it is recorded against an increase in the concession’s value. NOTE 13 - TAX ASSETS b) Intangible assets subject to guarantees or restrictions Current tax assets are as follows: The Company has aquaculture concessions that are subject to restrictions, in order to guarantee its financial obligations. 12/31/2019 12/31/2018 Tax receivables ThUS$ ThUS$ Movements in intangible assets as of December 31, 2019 are as follows: Audited Audited
VAT receivable 7,788 6,418 Useful life Useful life Indefinite Definite Total Monthly advanced payments 980 ThUS$ ThUS$ ThUS$ Audited Audited Audited Employee training tax credit 343 299 Opening balance as of January 1, 2019 46,580 3,978 50,558 Others 130 122 Accumulated amortization and impairment - (823) (823) Total 9,241 6,839 Additions - 263 263
NOTE 14 – OTHER NON-FINANCIAL ASSETS, NON-CURRENT Closing balance as of December 31, 2019 46,580 3,418 49,998
Movements in intangible assets as of December 31, 2018 are as follows:
Useful life Useful life 12/31/2019 12/31/2018 Indefinite Definite Total ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Audited Audited Audited Audited Audited
Austral law* 38,870 28,272 Opening balance as of January 1, 2018 38,704 1,920 40,624
Total 38,870 28,272 Accumulated amortization and impairment - (1,187) (1,187) Transferers (398) (680) (1,078) Additions 8,274 3,925 12,199 * This is a tax credit regarding assets included in investment projects in the 11th and 12th Regions and in Palena province until December 31, 2025. This credit offsets corporate Closing balance as of December 31, 2018 46,580 3,978 50,558 income tax, therefore it is considered an asset. The Company has until 2045 to use this credit. 138 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 139
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Concessions and water rights as of December 31, 2019 are as follows. Status as of a) Aquaculture concessions No. Name Macro zone Division District Region Hectares December 31, 2019
Own salmonid concessions 29 Salas 3 7 23b Aysén Eleventh 0.50 Others* 30 Humos 8 7 23b Aysén Eleventh 2.00 Others* Status as of No. Name Macro zone Division District Region Hectares December 31, 2019 31 Rivero 2 7 23b Aysén Eleventh 8.00 Others* 1 Guar 1 2 Calbuco Tenth 3.00 Others* 32 Salas 2 7 23b Aysén Eleventh 1.05 Others* 2 Rulo 1 3a Calbuco Tenth 5.35 Others* 33 Salas 4 7 23b Aysén Eleventh 1.20 Others* 3 Caicaen 1 3b Calbuco Tenth 1.00 Others* 34 Fitz Roy 7 23b Aysén Eleventh 1.50 Others* 4 Melchor 2 7 21c Aysén Eleventh 1.50 Others* 35 Rivero 4 7 23b Aysén Eleventh 6.00 Others* 5 Melchor 1 7 21c Aysén Eleventh 6.00 In use 36 Fitz Roy 2 7 23b Aysén Eleventh 1.00 Others* 6 Melchor 4 7 21c Aysén Eleventh 6.00 In use 37 Salas 5 7 23b Aysén Eleventh 3.00 Others* 7 Dring 1 7 22a Aysén Eleventh 2.00 Others* 38 Salas 7 7 23b Aysén Eleventh 1.50 Others* 8 Victoria 7 22a Aysén Eleventh 5.50 Others* 39 Salas 6 7 23b Aysén Eleventh 2.00 Others* 9 Italia 7 22d Aysén Eleventh 2.00 Others* 40 Rivero 6 7 23b Aysén Eleventh 6.00 Others* 10 Rivero 3 7 22d Aysén Eleventh 2.00 Others* 41 Fitz Roy 3 7 23b Aysén Eleventh 6.00 Others* 11 Luz 4 7 22d Aysén Eleventh 2.00 Others* 42 Burr 1 7 23c Aysén Eleventh 3.75 Others* 12 Patranca 1 7 22d Aysén Eleventh 6.00 Others* 43 Pulluche 2 7 23c Aysén Eleventh 2.00 Others* 13 Luz 5 7 22d Aysén Eleventh 2.00 Others* 44 Pulluche 3 7 23c Aysén Eleventh 6.00 Others* 14 Matilde 3 7 22d Aysén Eleventh 2.00 In use 45 Luz 1 7 24 Aysén Eleventh 2.00 Others* 15 Isquiliac 3 7 22d Aysén Eleventh 3.00 Others* 46 Humos 1 7 24 Aysén Eleventh 4.50 Others* 16 Rivero 5 7 22d Aysén Eleventh 2.00 Others* 47 Humos 2 7 24 Aysén Eleventh 4.50 In use 17 Isla Quemada 2 7 22d Aysén Eleventh 1.50 Others* 48 I Rojas 7 24 Aysén Eleventh 6.00 Others* 18 Veneria 7 22d Aysén Eleventh 3.00 Others* 49 Luz 3 7 24 Aysén Eleventh 2.00 Others* 19 Luz 6 7 22d Aysén Eleventh 3.00 Others* 50 Luz 2 7 24 Aysén Eleventh 1.99 Others* 20 Matilde 1 7 23a Aysén Eleventh 3.00 Others* 51 I Rojas 2 7 24 Aysén Eleventh 4.00 Others* 21 Rivero 1 7 23a Aysén Eleventh 3.99 Others* 52 Islas del medio 7 24 Aysén Eleventh 1.50 Others* 22 Matilde 2 7 23a Aysén Eleventh 2.98 Others* 53 Humos 9 7 24 Aysén Eleventh 4.50 Others* 23 Humos 5 7 23b Aysén Eleventh 4.50 In use 54 Traiguen 1 7 24 Aysén Eleventh 8 In use 24 Humos 6 7 23b Aysén Eleventh 4.50 In use 55 Elefante 1 7 26a Aysén Eleventh 4.00 Others* 25 Humos 7 7 23b Aysén Eleventh 1.00 Others* 56 Costa 7 26a Aysén Eleventh 7.87 In use 26 Humos 4 7 23b Aysén Eleventh 4.50 Others* 57 Casma 1 7 26b Aysén Eleventh 3.29 Others* 27 Humos 3 7 23b Aysén Eleventh 4.50 In use 58 Herrera 7 28ª Aysén Eleventh 6.00 Others* 28 Salas 1 7 23b Aysén Eleventh 0.50 Others* 59 Rabudos s/m 28b Aysén Eleventh 6.00 Others* 140 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 141
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Leased third party concessions Status as of No. Name Macro zone Division District Region Hectares December 31, 2019 Status as of 60 Melchor 3 7 30b Aysén Eleventh 2.00 Others* No. Name Division Region Hectares December 31, 2019 61 Moraleda s/m 30b Aysén Eleventh 12.97 In use 1 Williams 21D Eleventh 11.9 Other 62 Canalad 8 31B Cisnes Eleventh 10.81 Others* b) Water rights 63 Yalac 8 34 Cisnes Eleventh 4.25 Others* Own water rights 64 Refugio 8 34 Cisnes Eleventh 4.50 Others* 65 Coruña 8 45 Cisnes Twelfth 1.95 Others* Status as of No. Name Type Region December 31, 2019 66 Caleta Fog s/m 46 Natales Twelfth 10.00 In use 1 Río Negro 1 Fresh water Tenth Others** 67 Obstrucción s/m 46 Natales Twelfth 9.99 In use 2 Río Negro 2 Fresh water Tenth Others** 68 Bahía Tranquila s/m 47B Natales Twelfth 5.99 Others* 3 Río Negro 3 Fresh water Tenth Others** 69 Morgan s/m 47A Natales Twelfth 9.99 In use 4 Estero Carén 1 Fresh water Ninth Others** 70 Goddard s/m 48b Natales Twelfth 9.99 In use 5 Estero Carén 2 Fresh water Ninth Others** 71 Este Rocallosa- Skyring s/m 49b Punta Arenas Twelfth 20 In use 6 Est. Allipén Fresh water Ninth Others** 72 Bahía León s/m 49b Punta Arenas Twelfth 10.3 In use 7 Calbuco 1 Fresh water Tenth In use 73 Skyring 2 s/m 49B Magallanes Twelfth 6.00 Others* 8 Calbuco 2 Fresh water Tenth In use 74 Pan de Azúcar s/m 49b Punta Arenas Twelfth 10.04 In use 9 Calbuco 3 Fresh water Tenth In use 75 Seno Glaciar, Norte MG s/m 51 Punta Arenas Twelfth 9.92 In use 10 Calbuco 4 Fresh water Tenth In use 76 Punta Pedro s/m 51 Punta Arenas Twelfth 9.84 Others* 11 Calbuco 5 Fresh water Tenth In use 77 Punta Ramón s/m 51 Punta Arenas Twelfth 10.09 In use 78 Muñoz Gamero 2 s/m 51 Punta Arenas Twelfth 10.06 In use Water rights under financial leases 79 Norte Bahía Desilusión- Córdoba 1 s/m 52 Natales Twelfth 7.92 Others* Status as of 80 Isla Desolación- Córdoba 2 s/m 52 Punta Arenas Twelfth 8.84 Others* No. Name Type Region December 31, 2019 81 Suroeste Estero Córdoba 3 s/m 52 Natales Twelfth 8.84 Others* 1 Río Caliboro Fresh Water Eighth In use 82 Córdoba 4 (Bahía Williwaw) s/m 52 Magallanes Twelfth 6.26 In use 2 Vertiente SN Fresh Water Ninth In use 83 Punta Lauca s/m 53 Rio Verde Twelfth 19.95 In use 3 Rio Allipén Fresh Water Ninth In use 84 Punta Sur s/m 53 Magallanes Twelfth 9.8 Others* 4 Río Curacalco Fresh Water Ninth In use 85 Punta Lobos- Bahía Buckle s/m 53 Punta Arenas Twelfth 19.89 Others* 5 Canal del Laja Fresh Water Eighth Other** 86 Bahía Buckle s/m 53 Punta Arenas Twelfth 19.84 In use 87 Caleta Cascada s/m 53 Punta Arenas Twelfth 5.94 Others* Water rights under operating leases
88 Estero Retroceso s/m 53 Punta Arenas Twelfth 19.7 Others* Status as of No. Name Type Region December 31, 2019 89 Puerto Browne s/m 53 Punta Arenas Twelfth 9.81 In use 1 Estero Matanza Fresh water Ninth In use 90 Isla Grande s/m 50b Magallanes Twelfth 15 Others 91 Córdova 5 s/m 52 Magallanes Twelfth 20 In use * Fish farms that have not yet received smolts as of the reporting date are included as “Others”. ** Water rights that are not being used by the Company as of the reporting date are included as Others. * Bajo el concepto “otros” se han incluido centros de cultivo que al cierre del ejercicio no se encuentran sembrados. 142 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 143
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NOTE 16 – GOODWILL Property, plant and equipment as of December 31, 2019 is as follows.
Value Accumulated Value Goodwill represents the excess of the acquisition cost over the fair value of the acquiring company's participation in the identified Gross depreciation Net net assets of the acquired company on the acquisition date: ThUS$ ThUS$ ThUS$
Construction and works in progress 29,803 (5,619) 24,184 The goodwill balance at the end of the year is as follows: Land 12,269 - 12,269 12/31/2019 12/31/2018 ThUS$ ThUS$ Buildings 27,158 (6,236) 20,922 Audited Audited Plant and equipment 99,439 (51,567) 47,872 Pesquera Torres del Paine Ltda. 2,540 - IT equipment 2,501 (1,387) 1,114 Total 2,540 - Fixtures and fittings 56,848 (27,734) 29,114 Work in progress 65,623 - 65,623
Total property, plant and equipment 293,641 (92,543) 201,098 NOTE 17 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and its movements during the years ended December 31, 2019 and 2018 are as follows. Property, plant and equipment as of December 31, 2018 is as follows. Total property, Value Accumulated Value Plant and IT Fixtures and plant and Gross depreciation Net Buildings equipment equipment fittings Work in equipment, ThUS$ ThUS$ ThUS$ Construction net Land net net net net progress net Construction and works in progress 9,693 (3,855) 5,838 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Land 9,128 - 9,128 Opening balances as of January 1, 5,802 12,795 902 38,146 95 22,401 25,406 105,547 2018 Buildings 17,221 (4,502) 12,719 Additions 13 - - 242 180 92 54,963 55,490 Plant and equipment 75,167 (41,030) 34,137
Transfers from work in progress 4,088 - 152 7,823 113 2,921 (21,991) (6,894) IT equipment 1,644 (938) 706 Fixtures and fittings 41,223 (23,250) 17,973 Other increases (decreases) * (3,377) (3,667) 11,708 (4,478) 334 (520) - - Work in progress 55,534 - 55,534 Disposals (99) - - (57) - - (2,844) (3,000) Total property, plant and equipment 209,610 (73,575) 136,035 Depreciation (589) - (43) (7,539) (16) (6,921) - (15,108) The Company recognized depreciation for the period of ThUS$ 16,754 as of December 31, 2019 (ThUS$ 15,108 as of December Closing balances as of December 31, 5,838 9,128 12,719 34,137 706 17,973 55,534 136,035 31, 2018). 2018 (Audited)
a) Valuations and revaluations Additions - 3,141 7,638 10,756 420 473 67,206 89,634 Management has chosen the cost model as its accounting policy, and has applied this policy to all items in property, plant and Additions under construction 20,017 - 1,332 12,600 422 15,312 (57,117) (7,434) equipment. Disposals - - - (373) - - - (373) New property, plant and equipment is recorded at acquisition cost. Acquisitions in a currency other than the functional currency Depreciation (1,671) - (767) (9,248) (434) (4,644) - (16,764) are converted at the exchange rate on the acquisition date. Closing balances as of December 31, 24,184 12,269 20,922 47,872 1,114 29,114 65,623 201,098 2019 (Audited) The fair value of the principal fixed assets and land acquired before the date of transition to IFRS and owned by Australis Agua Dulce S.A. was based on valuations by external and independent experts. The plant and equipment category includes the Fitz Roy and Pesquera Torres del Paine processing plant, machinery and equipment for the salmon fattening process in sea and freshwater. The remaining fixed assets, particularly those owned by Australis Mar S.A. were valued using the historical cost model. Costs arising from daily maintenance and routine repairs are recorded in net income for the period, as opposed to replaced 144 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 145
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important parts or assets and strategic spare parts, which are capitalized as they are considered improvements and depreciated over f) Finance leases remaining useful life of the assets, based on these components. Assets acquired under finance leases are as follows. Gains and losses from the sale of property, plant and equipment are calculated by comparing the proceeds from the sale with the book value of the assets, and are taken to the statement of net income. 12/31/2019 12/31/2018 Property, plant and equipment under finance leases, net ThUS$ ThUS$ Audited Audited Individual assets will be valued at the lower of their book value and recoverable value. Constructions under finance leases 23,520 3,179 The Company has valued Chacabuco processing plant at the lower of their fair value and book value. Land under finance leases 4,883 1,648 Buildings under finance leases 867 884 b) Depreciation method Building and construction under finance leases 10,488 - Depreciation is calculated on a straight-line basis over the respective useful life of the asset. This useful life is based on natural Plant and equipment under finance leases 13,837 1,512 expected impairment and technical or commercial obsolescence, due to changes or improvements in production and changes in market demand for the products produced by these assets. Work in progress 1,513 23,404
Total 55,108 30,627 c) Useful lives and depreciation rates
Estimated useful lives by asset class are as follows: Water rights under finance leases 12/31/2019 12/31/2018 ThUS$ ThUS$ Fresh Water Sea Water Audited Audited Useful life Useful life Average Average Water rights under finance leases * 1,722 1,722
Buildings 14 14 Total 1,722 1,722
Plant and equipment 5 4 On May 11, 2012, Australis Agua Dulce S.A. signed a leaseback contract with Banco Santander amounting to ThUS$ 3,231 with an IT equipment 4 3 8 year term, a 1-year grace period and an annual interest rate of 4.69%, over the Curacalco fish farm, located in Cunco district in the Araucanía Region. Fixtures and fittings 6 9
The residual value and useful life of assets are reviewed and adjusted if needed at each reporting date. On November 21, 2011, subsidiary Australis Agua Dulce S.A. signed a leaseback operation with bank Bilbao Vizcaya Argentaria Chile, over fish farm Ketrún Rayén, located in Los Ángeles, Bío Bío region, amounting to ThUS$ 5,789, with an 8 year term, a d) Property, plant and equipment subject to guarantees or restrictions 6-month grace period and an annual interest rate of 3.94%. (No significant difference between the book value of the asset and the selling price to the bank resulted from this operation). Guarantees related to property, plant and equipment are described in Note 31. On August 30, 2015, Congelados y Conservas Fitz Roy S.A signed a leasing contract with De Lage Landen Chile, amounting The Company does not have any legal or contractual obligation to decommission, remove or rehabilitate its properties as of to ThUS$ 915, with a 5 year term and an annual interest rate of 6.19%. The asset acquired through this transaction was plant December 31, 2019. Therefore its assets do not include costs relating to these requirements. machinery.
e) Insurance On June 30, 2016, Congelados y Conservas Fitz Roy S.A signed a leasing contract with De Lage Landen Chile, amounting to ThUS$ 612, with a 5 year term and an annual interest rate of 6.23%. The asset acquired through this transaction was plant The Group has insurance policies to hedge the risks to its property, equipment, plants and machinery. Australis Seafoods S.A. and machinery. its subsidiaries considers that hedging these policies is appropriate for risks inherent in its business. On March 28, 2018, Australis Mar S.A. signed a leasing contract with Banco de Crédito e Inversiones for ThUS$5,714, with a 4 Insurance policies held by Australis Seafoods S.A. and subsidiaries are as follows. year term and an annual interest rate of 4.9%. The assets acquired through this transaction were two pontoons with a 480 ton feed capacity.
Asset Risks Covered On March 28, 2018, Australis Mar S.A. signed a leasing contract with Banco de Crédito e Inversiones for ThUS$6,115, with a 4 Basic coverage: Natural risks year term and an annual interest rate of 4.9%. The assets acquired through this transaction were two pontoons with a 600 ton feed Equipment and facilities capacity. Additional coverage: Theft, collision, fire
* Estos se presentan en el rubro activos intangibles distintos de la plusvalía. 146 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 147
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a) Deferred tax assets and liabilities are as follows. On April 19, 2018, Australis Mar S.A. signed a leasing contract with Banco de Crédito e Inversiones for ThUS$3,027, with a 4 year term and an annual interest rate of 4.90%. The assets acquired through this transaction were two pontoons with a 300 ton feed 12/31/2019 12/31/2018 capacity.
On September 30, 2019, Australis Mar S.A. signed a leaseback transaction with Banco BICE for an amount of ThUS $ 6,215, with Deferred Deferred tax Deferred Deferred tax a term of 5 years and an interest rate of 4.27%. The purpose of this contract is to refinance the leasing transaction concluded on tax assets liabilities tax assets liabilities March 30, 2018 with the same Bank. ThUS$ ThUS$ ThUS$ ThUS$ AUDITED On November 30, 2019, Congelados y Conservas Fitz Roy S.A., signed a leaseback operation with Banco Bice, for an amount of Indirect costs transferred to inventories and ThUS $ 8,030, with a term of 10 years at an interest rate of 4.99%, on the land and the Fitz Roy process plant, located in the Los - 25,496 - 18,871 Lagos region, Calbuco commune. biological assets Concessions - 3,632 - 2,838 On November 30, 2019, Congelados y Conservas Fitz Roy S.A., signed a leaseback operation with Banco Bice, for an amount of ThUS $ 8,570, with a term of 10 years at an interest rate of 4.99%, the machinery of the Fitz Roy process plant, located in the Los Tax losses 13,067 - 16,820 - Lagos region, Calbuco commune. Provisions 2,568 - 3,070 - Fallow fish farm provisions 1,097 - 895 - NOTE 18 - CURRENT AND DEFERRED INCOME TAXES Employee provision 1,471 - 1,342 - Allowance for doubtful debts 46 - 49 - Deferred taxes represent the income taxes that Australis Seafoods S.A. and its subsidiaries will have to pay (liabilities) or receive (assets) in future periods, related to timing differences between the tax value and the accounting value of certain assets and Property, plant and equipment - 4,576 - 3,281 liabilities. Fair value of biological asset provision - 31,866 - 20,372 The Group’s principal deferred tax assets are the tax losses recorded by the parent company and its subsidiaries, which will be Others - (382) - 77 recoverable in future periods. The principal deferred tax liabilities are the timing differences from manufacturing costs and revaluing Total 18,249 65,189 22,176 45,439 property, plant and equipment as of the transition date to IFRS and the application of accelerated depreciation for tax purposes.
No deferred taxes have been recorded for timing differences between the tax value and accounting value of investments in subsidiaries. Therefore, no deferred tax has been recorded for conversion adjustments and associate adjustments recorded directly in equity.
Tax losses recorded by companies incorporated in Chile can be carried forward indefinitely, and offset against future taxable income. Their use is not limited to any statutory deadlines.
b) Movements in deferred tax assets are as follows.
12/31/2019 12/31/2018 ThUS$ ThUS$ Audited Audited
Opening balance 22,176 35,041 Fallow fish farm provisions 202 141 Tax losses (3,753) (14,865) Provisions (376) 1,859
Closing balance 18,249 22,176 148 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 149
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c) Movements in deferred tax liabilities are as follows. A reconciliation between the income tax expense using the statutory rate and the effective rate is as follows.
Accumulated 12/31/2019 12/31/2018 ThUS$ ThUS$ Audited Audited 12/31/2019 12/31/2018 Opening balance 45,439 35,440 ThUS$ ThUS$ Audited Audited Manufacturing expenses 6,625 5,019 Income tax expense using the statutory rate (24,330) (22,613) Fair value of biological assets 11,494 5,183 Others 43 (430) Employee provisions - 1 Total income tax expense (24,287) (23,043) Concessions 794 (382) Property, plant and equipment 1,295 679
Others (458) (501) NOTE 19 - OTHER FINANCIAL LIABILITIES Closing balance 65,189 45,439 Australis Seafoods S.A. and its subsidiaries have financial loans as of December 31, 2019. These loans bear interest at nominal rates, which are not significantly different from their effective rates. d) Tax Reform
12/31/2019 12/31/2018 On September 29, 2014, Law 20,780 was published in the Official Gazette. This law introduced several amendments to the Interest bearing loans, current ThUS$ ThUS$ current system for income and other taxes. The main amendments include a progressive increase in corporate income tax rates for Audited Audited fiscal years 2014, 2015, 2016, 2017 and from 2018 forward from 20% to 21%, 22.5%, 24%, 25.5% and 27%, respectively, when Bank loans 335 21,718 the partially integrated taxation system is applied. Finance lease obligations 5,960 7,260 Following amendments to the tax reform law in February 2016, the Company’s corporate structure requires it to apply the partially Refinancing costs (712) (212) integrated taxation system with a maximum rate of 27% in 2018, since it cannot choose the attributed income taxation system. Total banking obligations that mature in less than 12 months 5,583 28,766
e) The income tax expense is as follows.
Accumulated 12/31/2019 12/31/2018 Interest bearing loans, non-current ThUS$ ThUS$ 12/31/2019 12/31/2018 Audited Audited ThUS$ ThUS$ Audited Audited Bank loans 130,000 80,000
Effect of deferred taxes (23,677) (22,865) Finance lease obligations 26,574 15,402 Others (610) (178) Refinancing costs (2,301) (587)
Total income tax expense (24,287) (23,043) Total banking obligations that mature in more than 12 months 154,273 94,815 The Company had no financial derivative instruments and hedging transactions as of December 31, 2019.
On august 2, 2019 the subsidiary Australis Mar S.A. signed the terms and conditions to restructure their financial liabilities with Bank of China Limited, Macau Branch.
The principal refinancing agreements are as follows.
i) The agreement contemplates at the end of the year an amount of ThUS $ 130,000, which on the one hand comes to 150 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 151
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restructure the existing syndicated loan with Coöperatieve Rabobank UA, DNB Bank ASA, and Banco Santander Chile through Australis Seafoods SA as of June 30 and December 31 of the following years is established, and they refer to Leverage Ratio and the purchase of the total capital owed by ThUS $ 90,000 and, on the other hand, ThUS $ 40,000 used in the purchase of fixed Interest Cover levels. assets to increase operations and prepayment of obligations for financial leases.
ii) The interest rate contemplated in the Credit Agreement was agreed in the sum of the 90-day Libor Dollar rate established at the end of the payment of each interest period plus a fixed margin.
iii) Additionally, compliance with certain financial indexes (covenants) calculated on the consolidated Financial Statements of
Financial Covenants 2020-2022
Leverage ratio¹ ≤4.5 Interest cover² ≥3.5
I. Leverage Ratio: The sum of the following accounts in the consolidated financial statements: /a/ Other financial liabilities, current, plus /b/ Other financial liabilities, non-current, less /c/ cash and cash equivalents, all divided by the Adjusted EBITDA for the preceding twelve months, defined as the result of the following formula: /a/ Revenue; less /b/ Cost of sales; less /c/ Administrative expenses; less /d/ Distribution costs; and plus /e/ Depreciation and amortization expense
II. Interest cover: Ratio between EBITDA and bank interest paid in the period
iv) The contract establishes voluntary and other mandatory early amortization possibilities, as well as certain information obligations, to do and not to do, typical of this type of agreement.
Australis Seafoods S.A. complies with the leverage ratio and interest cover indicators as of December 31, 2019. 152 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 153
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Additional information regarding other financial liabilities
a) The bank loans held by Australis Seafoods S.A. and its subsidiaries as of December 31, 2019 and 2018 are as follows.
As of December 31, 2019 (Audited)
Debtor Creditor Maturity
Effective rate Total current 1 to 2 2 to 3 3 to 5 Total non-current Chilean ID Chilean Repayment Annual Nominal rate as of 12/31/2019 years years years as of 12/31/2019 Number Debtor Name Country Creditor Name ID Number Country Currency terms % Annual Guarantees ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
76.003.885-7 Australis Mar S.A. Chile BOC China - China US$ Bullet* 3.55% 3.55% Yes 200 - - 90,000 90,000 76.003.885-7 Australis Mar S.A. Chile BOC China - China US$ Bullet* 3.51% 3.51% Yes 124 - - 30,400 30,400 76.003.885-7 Australis Mar S.A. Chile BOC China - China US$ Bullet* 3.50% 3.50% Yes 10 - - 7,532 7,532 76.003.885-7 Australis Mar S.A. Chile BOC China - China US$ Bullet* 3.55% 3.55% Yes 1 - - 2,068 2,068 Total bank loans 335 130,000 130,000
As of December 31, 2018 (Audited)
Debtor Creditor Maturity
Effective rate Total current 1 to 2 2 to 3 3 to 5 Total non-current Chilean ID Chilean Repayment Annual Nominal rate as of 12/31/2019 years years years as of 12/31/2019 Number Debtor Name Country Creditor Name ID Number Country Currency terms % Annual Guarantees ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
76,003,885-7 Australis Mar S.A. Chile Banco Santander Chile 97,036,000-K Chile US$ Semi-annual 5.19% 5.19% Yes 4,264 4,000 4,000 4,000 12,000 76,003,885-7 Australis Mar S.A. Chile Banco Santander Chile 97,036,000-K Chile US$ Semi-annual 5.19% 5.19% Yes 55 - - 4,000 4,000 76,003,885-7 Australis Mar S.A. Chile Rabobank - Holland US$ Semi-annual 5.19% 5.19% Yes 8,443 8,000 8,000 8,000 24,000 76,003,885-7 Australis Mar S.A. Rabobank - Holland US$ Semi-annual 5.19% 5.19% Yes 111 - - 8,000 8,000 76,003,885-7 Australis Mar S.A. DNB - Norway US$ Semi-annual 5.19% 5.19% Yes 8,443 8,000 8,000 8,000 24,000 76,003,885-7 Australis Mar S.A. DNB - Norway US$ Semi-annual 5.19% 5.19% Yes 111 - - 8,000 8,000 Australis Agua 76,090,483-K Chile Banco Santander Chile 97,036,000-K Chile US$ Monthly 4.68% 4.68% NO 291 - - - - Dulce S.A.
Total bank loans 21,718 20,000 20,000 40,000 80,000
* Bullet credits are those that are paid in full at maturity. 154 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 155
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b) Financial leases held by Australis Seafoods S.A. and its subsidiaries as of December 31, 2019 and 2018 are as follows. c) Movements in these financial obligations as of December 31, 2019 are as follows.
Flow December 31, 2019 December 31, 2018 Payments
Gross value Interest Present Value Gross value Interest Present Value Balance Balance ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ as of as of AUDITED AUDITED AUDITED AUDITED AUDITED AUDITED 12/31/2018 Capital Interest Acquisitions Accrual Reclassifications Refinance Others 12/31/2019 Financial liabilities ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Less than one year 7,370 (1,410) 5,960 8,207 947 7,260 Current Over one year but less than five years 20,725 (3,283) 17,442 16,448 1,046 15,402 Bank loans 21,718 (10,356) (6,140) 26,500 5,113 (36,500) - - 335 Over five years 10,317 (1,185) 9,132 - - -
Total 38,412 (5,878) 32,534 24,655 1,993 22,662 Finance lease obligations 7,260 (9,660) (832) 6,761 - 5,371 (1,906) (1,033) 5,960
Borrowing costs (212) ------(500) (712)
Financial leases obligations cover the following lease contracts. Total financial liabilities, current 28,766 (20,016) (6,972) 33,261 5,113 (31,129) (1,906) (1,533) 5,583
Amount Annual Balance Contract ThUS$ Number of interest 12/31/2019 Non-current Type Institution date installments rate % ThUS$ Bank loans 80,000 - - 1,300 - 36,500 12,200 - 130,000 Curacalco fish farm Banco Santander Chile 05/11/2012 3,392 85 4.95 279 Plant machinery De Lage Landen Chile 07/30/2015 915 60 6.19 140 Finance lease obligations 15,402 - - 25,236 - (5,371) (8,693) - 26,574 Plant machinery De Lage Landen Chile 06/23/2016 548 60 6.22 197 Borrowing costs (587) ------(1,715) (2,302) Banco de Crédito e Pontoons 480 CL 03/29/2018 5,715 40 4.90 3,481 Total financial liabilities, non-current 94,815 - - 26,536 - 31,129 3,507 (1,715) 154,273 inversiones Banco de Crédito e Feed pontoons 04/19/2018 3,027 41 4.90 1,861 inversiones Total financial liabilities 123,581 (20,016) (6,972) 59,797 5,113 - 1,601 (3,248) 159,855 Pontoons 480 CL Banco BICE 09/30/2019 6,215 61 4.27 5,941 Pontoons 600 CL Banco BICE 11/15/2019 4,382 61 4.27 4,254 Planta process and Land FRSA Banco BICE 11/30/2019 8,030 121 4.99 7,920 Plant Machinery from FRSA Banco BICE 11/30/2019 8,570 121 4.99 8,461 156 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 157
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NOTE 20 - TRADE AND OTHER PAYABLES Suppliers by due date as of December 31, 2018 are as follows.
Trade and other payables are as follows: - Suppliers with payments not overdue Amount by payment term in days Total 12/31/2019 12/31/2018 Supplier Under 30 31-60 61-90 91-120 121-365 Over 366 days ThUS$ ThUS$ ThUS$ Audited Audited Products 15,436 12,948 9,839 6,674 - - 44,897 Suppliers 159,904 86,396 Services 12,110 5,075 402 1,830 - - 19,417 Employee retentions 853 659 Others 5,741 - - - - - 5,741 Payables 7,879 14,847 Total ThUS$ 33,287 18,023 10,241 8,504 - - 70,055 Payable dividends 10,427 - - Suppliers with payments overdue Total 179.063 101,902 Amount by payment term in days Total Supplier Under 30 31-60 61-90 91-120 121-365 Over 366 days ThUS$
Suppliers by due date as of December 31, 2019 are as follows. Products 2,619 1,601 199 31 - - 4,450
- Suppliers with payments not overdue Services 8,142 2,271 190 149 - - 10,752 Others 1,139 - - - - - 1,139 Amount by payment term in days Total ThUS$ 11,900 3,872 389 180 - - 16,341 Total Supplier Under 30 31-60 61-90 91-120 121-365 Over 366 days ThUS$ Total suppliers 86,396 Products 23,434 13,480 11,524 13,283 11,415 - 73,136
Services 35,558 13,947 5,374 3,641 5 - 58,525 NOTE 21 - EMPLOYEE BENEFIT PROVISIONS, CURRENT Others 1,529 362 6 - - - 1,897 The Company recognizes expenditure on staff vacations and bonuses using the accrual method, in accordance with each Total ThUS$ 60,521 27,789 16,904 16,924 11,420 - 133,558 individual’s length of service.
These provisions as of each reporting date are as follows. - Suppliers with payments overdue 12/31/2019 12/31/2018 ThUS$ ThUS$ Amount by payment term in days Audited Audited Total Supplier Under 30 31-60 61-90 91-120 121-365 Over 366 days ThUS$ Employee bonus provisions 3,440 3,222 Employee vacation provisions 2,808 2,344 Products 3,633 1,835 72 - - - 5,540 Total employee benefits provisions, current 6,248 5,566 Services 14,858 4,374 154 - - - 19,386 Others 1,061 359 - - - - 1,420 Movements on these provisions are as follows. Total ThUS$ 19,552 6,568 226 - - - 26,346 Employee bonus provisions 12/31/2018 12/31/2017 Total suppliers 159,904 ThUS$ ThUS$ Audited Audited
Opening balance 3,222 2,744 Increase (decrease) in provisions 5,738 2,556 Provisions utilized (5,520) (2,078)
Closing balance 3,440 3,222 158 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 159
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Common shares 12/31/2019 12/31/2018 Number of shares Common shares Total Employee vacation provisions ThUS$ ThUS$ Audited Audited As of January 1, 2019 6,825,687,194 6,825,687,194 6,825,687,194 Opening balance 2,344 2,068 Capital increase - - -
Increase (decrease) in provisions 3,660 1,541 Closing balance as of December 31, 2019 6,825,687,194 6,825,687,194 6,825,687,194 Provisions utilized (3,196) (1,265)
Total 2,808 2,344 Common shares Number of shares Common shares Total
As of January 1, 2018 6.825.687.194 6.825.687.194 6.825.687.194 NOTE 22 – SHARE CAPITAL Capital increase - - - The Company’s capital amounts to three hundred and five million three hundred and eighty-three thousand US dollars (ThUS$ Closing balance as of December 31, 2018 6.825.687.194 6.825.687.194 6.825.687.194 305,383) divided into 6,825,687,194 shares (six billion, eight hundred and twenty-five million, six hundred and eighty-seven thousand, one hundred and ninety-four shares), as follows: b) Dividend Policy ThUS$ Number of Shares The Company’s distributable net income will be calculated by excluding from net income for the period the following.
Subscribed and paid capital 305,383 6,825,687,194 i. Unrealized income relating to recognizing increases in the fair value of biological assets regulated by the accounting standard Total capital 305,383 6,825,687,194 “IAS 41”. This income will be recognized as distributable net income when such assets have been realized. For these purposes, realized means the portion of those increases in fair value corresponding to assets sold or removed by any means. * Subscribed and paid capital: An Extraordinary Shareholders Meeting on December 3, 2015 agreed to increase the share capital ii. Unrealized income from the acquisition of other entities and unrealized income arising from applying paragraphs 34, 42, 39 and by ThUS$ 60,000, by issuing 3,397,452,229 ordinary shares, thus canceling the portion not placed of the capital increase 58 of the revised IFRS 3, which refers to business combinations. This income will be included in distributable net income upon agreed at the Extraordinary Shareholder’s Meeting on July 3, 2015, equivalent to 80,630,056 shares. A Board meeting held on realization. For these purposes, realized means when the acquired entities generate profits after their acquisition, or when those December 10, 2015 authorized the board to set the final placement price for these shares. Accordingly, 3,484,943,142 shares entities are sold. were subscribed and paid as of December 31, 2015.
iii. The effects of deferred taxes associated with income indicated in 1) and 2) will be treated in the same manner as the item 3,340,744,052 shares that were subscribed under the capital increase agreed at the Extraordinary Shareholder’s Meeting on generating them. December 3, 2015, were paid during the first quarter of 2016. This payment was for ThUS$ 55,888.
- Dividend provision 7,000,000 shares approved by the Board in 2011 under the Executive Incentive Scheme (“stock options”), were treated as a legal reduction of their subscription value. Accordingly, in accordance with Article 24 of Law 18,046 regarding Corporations, the The Company provided a dividends provision for ThUS$ 10,427. Company’s capital must be legally reduced by their subscription value, i.e., by US$ 299,492.
The Company’s subscribed and paid-up share capital at the reporting date is three hundred and five million three hundred and eighty-three thousand US dollars (ThUS$ 305,383), which is divided into six billion eight hundred and twenty-five million six hundred and eighty-seven thousand one hundred and ninety-four shares (6,825,687,194).
a) Subscribed capital The Company’s subscribed capital is as follows.
Subscribed capital Paid capital Serie Number of shares Number of shares
Single 6,825,687,194 6,825,687,194 160 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 161
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c) Shareholder distribution 12/31/2019 12/31/2018 The principal shareholders of Australis Seafoods S.A. as of December 31, 2019 are as follows. ThUS$ ThUS$ Audited Audited
Name or Corporate Name Number of Shares % Interest Earnings per share 0.0096 0.0088
Food Investment SPA 6,818,336,258 99.892% Basic earnings per share is net income attributable to shareholders divided by the number of single series shares. The Company has not issued convertible debt or other equity securities. Consequently, there are no potentially diluting effects on earnings per share. BCI C De B S.A. 2,002,915 0.029% Santander Corredores De Bolsa Limitada 1,148,669 0.017% ii. Net distributable income Banchile C De B S.A. 987,579 0.014%
Moneda Corredores De Bolsa Limitada 595,238 0.009% The dividend policy for the period is to distribute a final dividend of at least 30% of net distributable income for the year ended December 31, 2019, which must be approved by the Annual Shareholder’s Meeting, and be paid on the date agreed at that Consorcio C De B S.A. 479,938 0.007% meeting. Banco Estado S.A. Corredores De Bolsa 461,156 0.007% Bice Inversiones Corredores De Bolsa S.A. 317,835 0.005% The obligatory 30% minimum dividend established by Article 79 of Law 18,046 will be calculated on the basis of reclassified income following relevant adjustments in the fair value of unrealized assets and liabilities, as described in Circular 1945 issued by Euroamerica C De B S.A. 253,998 0.004% the SVS on March 29, 2009. These unrealized assets and liabilities will be included in the calculation of net distributable income Valores Security S A C De B 200,394 0.003% for the period they are realized.
BTG Pactual Chile S.A. C De B 192,431 0.003% Additional dividends will be based on the mentioned criteria, and approved by the respective Shareholder’s Meeting. Itaú Corredores De Bolsa Limitada 177,987 0.003% Net distributable income for the year ended December 31, 2019 is calculated as follows. Nevasa S.A Corredores De Bolsa 136,890 0.002% 12/31/2019 Larraín Vial S.A. Corredora De Bolsa 129,283 0.002% ThUS$ Audited Others 266.623 0,004% Net income attributable to controlling interests 65.825
NOTE 23 - RETAINED EARNINGS (ACCUMULATED LOSSES) Change in the fair value of biological assets (42.574) Deferred taxes associated with the fair value of biological assets 11.495 Accumulated losses are as follows. Net income 34.756 12/31/2019 12/31/2018 Accumulated losses - ThUS$ ThUS$ Audited Audited Net distributable income 34.756 Opening balance 15,035 (45,676) Dividend distribution at 30% 10.427 Net income for the period 65,825 60,711 The following is the distribution of dividends to the shareholders Dividends (10,427) - 12/31/2019 ThUS$ Closing balance 70,433 15,035 Audited
Profit attributable to owners of parent 10,416 NOTE 24 - EARNINGS PER SHARE AND NET DISTRIBUTABLE INCOME Profit attributable Non-controlling owners 11 i. Earnings per share Total dividens 10,427 Earnings per share on continuing operations are as follows. 162 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 163
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NOTA 25 - OPERATING REVENUE NOTE 27 - DISTRIBUTION COSTS
Accumulated Group operating revenue is as follows. Distribution costs are as follows: Cumulative
12/31/2019 12/31/2018 12/31/2019 12/31/2018 ThUS$ ThUS$ ThUS$ ThUS$ Audited Audited Audited Audited Sales of finished products 394,077 350,071 Land freight (1,310) (945) Others 13,209 10,807 Third party cold storage plant (2,140) (2,024) Total 407,286 360,878 The Group’s operating revenue is principally the sale of products derived from the harvest of biological assets. Sales expenses (1,753) (1,748) Employee remuneration (4,344) (3,646) NOTE 26 - OTHER INCOME AND EXPENSES BY FUNCTION Third-party services (780) (773) Other sales expenses (1,435) (1,130) Other income and expenses by function for the group are as follows. Cumulative Total (11,762) (10,266)
12/31/2019 12/31/2018 Other income, by function ThUS$ ThUS$ The personnel expenses are detailed below: Audited Audited Cumulative Insurance claims 555 1,612 12/31/2019 12/31/2018 Other sales 188 536 ThUS$ ThUS$ Audited Audited Gain on sale of concessions and PP&E 13 1,009 Deferred gain on leaseback 85 83 Remuneration (3,015) (2,824) Others 127 422 Benefits (831) (649) Total 968 3,662 Others (498) (173)
Cumulative Total (4,344) (3,646)
12/31/2019 12/31/2018 Other expenses by function ThUS$ ThUS$ Audited Audited NOTE 28 - ADMINISTRATIVE EXPENSES
Loss on sale of property, plant and equipment (261) (20) Administrative expenses are as follows. Fallow centers - (146) Cumulative Deferred loss on leaseback - (104) Extraodinary mortality (533) - 12/31/2019 12/31/2018 ThUS$ ThUS$ Unrecoverable debts (132) (108) Audited Audited Losses on fish farms* - (2,314) Leases (32) (168) Losses on Casona Fitz Roy - (156) Employee expenses (5,965) (6,792) Debt restructure** (933) - Iddle plant capacity (396) - Depreciation and amortization (1,200) (539) Plant seizures (193) - Third-party services (3,462) (3,270) Extraordinary seizures - (317) Others (795) (1,103) Taxes (354) - Total (11,454) (11,872) Impairment purchase price allocation (180) - Others (275) (106) Total (3,257) (3,271) * In 2018 there was a loss of 289 tons of biomass occurred in Córdova 2 Center for ThUS$ 827 and ThUS$ 1,139 for expenses associated with its removal. The subsidiary Australis Mar S.A. has current insurance policies, which are being managed for their corresponding liquidation. ** Due to the restructuring of the syndicated loan that was carried out with Bank of China Macau Branch. Costs had to be incurred early waiver of the credit with the Coöperatieve Rabobank UA Banks, DNB Bank ASA, and Banco Santander Chile, which generated an expense of ThUS $ 630. Additionally, when subscribing new notes with BOC for ThUS $ 40,000, it was due pay for stamp duty and stamp THUS $ 303. 164 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 165
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Employee expenses are as follows. Assets and liabilities in foreign currencies Cumulative
12/31/2019 12/31/2018 ThUS$ ThUS$ 12/31/2019 12/31/2018 Audited Audited ThUS$ ThUS$ Current assets Currency Audited Audited Remuneration (4,499) (5,238) Cash and cash equivalents Chilean peso 1,760 677 Benefits (1,044) (863) Cash and cash equivalents US dollar 9,498 16,429 Others (422) (691) Sub-total for cash and cash equivalents 11,258 17.106 Total (5,965) (6,792)
Other non-financial assets, current Chilean peso 1,480 1,204 NOTE 29 - FINANCIAL COSTS, NET Other non-financial assets, current US dollar 4,539 3,169 Sub-total for other non-financial assets, current 6,019 4,373 Financial costs are as follows. Cumulative Trade and other receivables, current Chilean peso 2,336 3,051 12/31/2019 12/31/2018 Trade and other receivables, current US dollar 27,759 36,223 ThUS$ ThUS$ Audited Audited Sub-total for trade and other receivables, current 30,095 39,274 Financial interest (6,381) (5,922)
Bank charges (944) (419) Accounts receivable from related entities US dollar 3,089 -
Total (7,325) (6,341) Sub-total for Accounts receivable from related entities, 3,089 - current
NOTE 30 - EXCHANGE DIFFERENCES ON ASSETS AND LIABILITIES IN FOREIGN CURRENCIES Inventories, current US dollar 46,976 44,842
a) Exchange differences recognized in the statement of net income Sub-total for inventories, current 46,976 44,842
Exchange differences generated by assets and liabilities in foreign currencies, other than the functional currency, were credited (charged) to the statement of net income for the years ended December 31, 2019 and 2018 as follows. Biological assets, current US dollar 294,368 189,266 Sub-total for biological assets, current 294,368 189,266
Cumulative Inflation indexed Tax assets, current 9,241 6,839 Chilean pesos 12/31/2019 12/31/2018 ThUS$ ThUS$ Sub-total for tax assets, current 9,241 6,839 Audited Audited
Exchange differences on assets (4,269) (1,535) Exchange differences on liabilities 6,224 2,865
Total exchange differences 1,955 1,330 166 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 167
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12/31/2019 12/31/2018 12/31/2019 12/31/2018 ThUS$ ThUS$ ThUS$ ThUS$ Non-current assets Current liabilities Currency Audited Audited Currency Audited Audited Other financial liabilities, current US dollar 5,583 28,766 Other non-financial assets, non-current Chilean peso 38,870 28,272 Sub-total for other financial liabilities, current 5,583 28,766 Sub-total for other non-financial assets, non-current 38,870 28,272
Inflation indexed Trade and other payables, current 53,425 44,292 Investments accounted for using the equity method US dollar 6 49 Chilean peso Sub-total for related party receivables, non-current 6 49 Trade and other payables, current US dollar 125,668 57,610 Sub-total for trade and other payables, current 179,093 101,902
Intangible assets other than goodwill US dollar 49,998 50,558 Inflation indexed Sub-total Intangible assets other than goodwill 49,998 50,558 Employee benefit provisions, current 6,248 5,566 Chilean peso Sub-total for employee benefits provisions, current 6,248 5,566 Goodwill US dollar 2,540 - Sub-total goodwill 2,540 -
Property, plant and equipment US dollar 201,098 136,035 Sub-total for property, plant and equipment 201,098 136,035 12/31/2019 12/31/2018 Non-current liabilities ThUS$ ThUS$ Currency Audited Audited Biological assets, non-current US dollar 72,351 56,069 Other financial liabilities, non-current US dollar 154,273 94,815 Sub-total for biological assets, non-current 72,351 56,069 Sub-total for other financial liabilities, non-current 154,273 94,815
Deferred tax assets US dollar 18,249 22,176 Accounts payable to related entities, non current US dollar 6 - Sub-total for deferred tax assets 18,249 22,176 Sub-total Accounts payable to related entities, 6 - non-current
Deferred tax liabilities US dollar 65,189 45,439
Sub-total for deferred tax liabilities 65,189 45,439 168 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 169
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NOTE 31 - CONTINGENCIES, COMMITMENTS AND GUARANTEES
a) Pledged shares
Assets By means of a public deed dated July 5, 2019, granted at the Santiago notary office of Mr. Roberto Antonio Cifuentes Allel, Debtor Committed under the directory number 7.480-2019, DNB Bank ASA, Cooperatieve Rabobank UA, Banco Santander Chile, DNB Bank Creditor ASA , Sweden Branch (acting as Agent Bank), and Bank of China Limited, Macau Branch (“Bank of China”), entered into a Guarantee Name Relationship Guarantee Type Credit Assignment, Rights and Obligations Contract for the Restructuring of Financial Liabilities and Opening of Financing ( the "Assignment Agreement"). Under the Assignment Agreement, Bank of China acquired all the credits, rights and obligations Banco BCI Australis Mar S.A. Subsidiary Real Not applicable emanating from the Debt Recognition, Financial Liability Restructuring and Opening Financing Agreement, signed by public deed dated September 25, 2017 , granted at the Santiago notary's office of Don Eduardo Avello Concha, under the repertoire number 33.638-2017 (the "Assigned Credit Agreement"). Subsequently, through a private instrument dated August 6, 2019, granted Aqua Gen Chile S.A. Australis Mar S.A. Subsidiary Real Not applicable abroad in the English language and subject to the laws of England, Australis Mar SA and Bank of China signed a credit agreement for up to USD $ 160,000,000 (the "Australis Mar Credit Agreement"). The Australis Mar Credit Agreement consolidated, Congelados y Conservas Fitz modified and recast the existing loans under the Assigned Credit Agreement into a single instrument. De Lage Landen Chile S.A. Subsidiary Real Not applicable Roy S.A. The guarantees conferred by the Company and its subsidiaries within the framework of the Credit Agreement were raised by means of (i) public deed of term, release, cancellation and cancellation of bond and joint debt, signed by Bank of China Limited, d) Guarantees granted by subsidiaries. Macau Branch, Australis Seafoods SA, Australis Agua Dulces SA and Congelados y Conservas Fitz Roy SA, dated October 15, 2019 under the directory number 13.605-2019, (ii) public deed of lifting, cancellation and termination of garments and On the occasion of the Credit Agreement and the Novation Contracts, the following guarantees were signed in order to ensure prohibitions signed by Bank of China Limited, Macau Branch, dated October 8, 2019 under directory number 13.231-2019, and the obligations arising from it (iii) public deed of lifting, cancellation and termination of mortgages and prohibitions signed by Bank of China Limited, Macau Branch, with dated October 8, 2019 under the directory number 13.232-2019. 1. Australis Mar S.A. i. Personal guarantee for the obligations assumed by Congelados y Conservas Fitz Roy SA under a leasing contract signed with The guarantees are in the cancellations process in the respective registries according to the nature of the same. Banco BICE. Mortgage and prohibition to encumber and dispose of various aquaculture concessions owned by it. ii. Personal guarantee for the obligations assumed by Transportes Naviera Austral SA under a financing contract signed with On October 18, 2019, an extraordinary meeting of shareholders of the Company was held in which the constitution of real and Banco BCI. personal guarantees was approved by it and its subsidiaries, to guarantee the obligations contracted by its parent Food Investment SpA (“Food”) under the credit agreement dated June 5, 2019, called Up to US $ 450,000 equivalent Term Facility Agreement, executed between Food and Bank Of China Limited, Macau Branch, as the main structuring and registration agent ( mandated e) Guarantees granted by third parties. lead arranger and bookrunner), agent (agent) of the financial entities, foreign guarantee agent (offshore security agent), and original creditor (original lender); Bank of China Limited, Beijing Haidian Sub-Branch as Lead Signed Registrar and Bookrunner, Likewise, under the Credit Agreement, Legend Holdings Corporation, a company duly constituted by the laws of China, PRC Security Agent and Original Lender; China Minsheng Banking Corp., Ltd. Shanghai Pilot Free Trade Zone Branch, acting subscribed a bond to guarantee compliance with the obligations assumed by Australis under the Credit Agreement. as lead structuring agent (mandated lead arranger) and original creditor (original lender); Tai Fung Bank Limited, in its capacity as lead arranger and original creditor, subject to the laws of England, in an amount of up to 450,000,000 Dollars or its equivalent in Hong Kong dollars (the “ Credit Agreement ”). f) Restrictions
Personal and real guarantees of the Company and its subsidiaries aimed at guaranteeing the obligations of the Credit Agreement On the occasion of the Credit Agreement, and while its obligations are in force, the following financial restrictions must be met: are in the process of being granted and subsequent registration in the competent registers according to their nature. 1. Leverage Ratio: At the end of the periods of June 30, 2020, December 31, 2020, June 30, 2021, December 31, 2021, June 30, 2022, a leverage ratio equal to or less than 4 must be presented, 5 times. For successive periods, the leverage ratio must be b) Direct guarantees equal to or less than 4 times.
A la fecha de cierre de los presentes estados financieros, Australis Seafoods S.A., no presenta garantías directas de ninguna 2. Interest Cover: At the end of any successive period from June 30, 2020 (inclusive), the interest cover must be equal to or especie. greater than 3.5 times.
c) Indirect guarantees Both indicators are met by the company at the closing of these consolidated financial statements. Australis Seafoods S.A. has the following guarantees in favor of its subsidiaries. 170 AUSTRALIS SEAFOODS CONSOLIDATED FINANCIAL STATEMENTS 171
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NOTE 32 - ENVIRONMENT NOTE 33 - SUBSEQUENT EVENTS
Australis Seafoods S.A. and its related companies have an Environment team, who are responsible for compliance with the Between December 31, 2019 and the date of issuance of these consolidated financial statements, no other events of financial or Company’s environmental objectives and obligations, in accordance with the regulations governing an aquaculture business, and other nature have occurred that might significantly affect their interpretation. international standards that certify our production.
Therefore, Australis Seafoods S.A. implements plans and disbursements that relate to investments and expenditure, in order to monitor, control and reduce the environmental impact of its production processes as follows. NOTE 34 - OTHER INFORMATION
The Group’s environmental protection project expenditure as of December 31, 2019 is as follows. The number of employees by category at Australis Seafoods S.A. and its subsidiaries is as follows.
12/31/2019 12/31/2018 ThUS$ ThUS$ Audited Audited As of December 31, 2018 Indefinite contracts 1,759 1,367
Amount Fixed-term contracts 605 213 committed in Estimated Description future periods Fixed or estimated project Total 2,364 1,580 Company Project Name ThUS$ ThUS$ disbursement date completion date Australis Mar S.A. Evaluation, research preparation Third-party services 1,708 Partial* December and review of projects submitted 2020 for environmental impact approval
Australis Mar S.A. Monitoring of environmental para- Third-party services 269 Three monthly Ongoing meters, environmental reports on fish farming centers and environ- mental monitoring of productive units. Australis Mar S.A. Waste management Third-party services 150 Three monthly Ongoing
Congelados y Conservas Monitoring environmental Third-party services 16 Regularly** Ongoing Fitz Roy parameters, environmental reports and environmental monitoring.
* Partial project payments, according to progress achieved. ** Expenditure for the quarter but comprising disbursements with other frequencies, for example: quarterly, monthly, as required. 172 AUSTRALIS SEAFOODS 173
Memoria Anual 2017 174 175 176
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